[Giving rise to Civil Appeal (arising out of SLP
No. 19445 of 2004, State of Uttaranchal Ors.
vs. State of Kumaon Stone Crusher and Civil Appeal
(arising out of SLP No. 26273 of 2004, the State of U.
P. Ors. vs. M/s. Kumaon Stone Crusher.]

ii) To quash the fixation of rates of
fees for issuance of transit passes
ANNEXURE­P/2.

iii) To quash the demand for payment of
fees for transit of coal ANNEXURE­P/3

iv) To grant such other appropriate
35

relief as deemed and fit and proper in
the facts and circumstances of the case.”

47. More or less similar reliefs were claimed in the

other writ petitions before the M.P. High Court. In some

of the writ petitions prayer was also made for issuing

writ of mandamus declaring Section 2(4)(b)(iv) and

Section 41 of the 1927 Act as unconstitutional and ultra

vires to the extent it relates to minerals. Prayer was

also made to declare M.P. Transit (Forest Produce) Rules,

2000 and notification dated 28.05.2001 as ultra vires to

the power of the State under 1927 Act.

48. Counter­affidavit was filed by the State contending

that as per Section 41 of 1927 Act, the State is

conferred with a power to make rules to regulate the

transit of all timer and other forest­produce.

49. The High Court after hearing the parties and

considering the submissions by the impugned judgment

quashed the notification dated 28.05.2001 by which fee of

Rs.7/­ was fixed. The High Court also directed refund of

the amount in a phased manner with a period of five

years. Aggrieved by the judgment dated 14.05.2001 the
36

State of Madhya Pradesh has filed these appeals.

50. We have heard learned counsel appearing for the

States as well as learned counsel appearing for various

writ petitioners.

51. While referring the respective submissions of the

learned counsel, submissions on behalf of the writ

petitioners have been referred to as submissions of writ

petitioners and the submissions on behalf of the States

have been referred to as on behalf of the State.

VI. Submissions with regard to the judgment of
Uttarakhand High Court

52. As noted above both the State of Uttarakhand and

State of U.P. have challenged the judgment of Uttarakhand

High Court. Shri Dinesh Dwivedi, learned senior counsel

questioning the judgment dated 01.07.2004 of Uttarakhand

High Court in M/s. Kumaon Stone Crusher vs. State of

Uttarakhand, submits that boulders crushed into grits

retain same characteristic that is forest produce. By

obtaining grits, stone chips and dust no new material is

obtained. Challenging the judgment of Uttarakhand High

Court in M/s. Gupta Builders dated 26.06.2007, it is
37

submitted that the mere fact that royalty has been paid

by the writ petitioners in accordance with the Uttar

Pradesh Minor Minerals (Concession) Rules, 1963 as

adopted in Uttarakhand by Uttarakhand Minor Minerals

(Concession) Rules, 2001 shall have no effect on the

entitlement of the State to levy transit fee. The

judgment of the High Court that no transit fee can be

levied on the minerals is erroneous. It is further

submitted that the High Court erred in adopting a very

restrictive meaning of word ‘forest’ whereas the forest

has to be understood in a wide sense. It is contended

that Forest Act, 1927 and MMDR Act, 1957 operate in

different fields. In so far as the case of the writ

petitioners is that transit fee is being charged for

second transit also. It is submitted that transit pass

has its destination and after it reaches its destination,

the pass comes to an end, the transit fee can be validly

charged.

53. Replying the above submission of State, learned

counsel for writ petitioners submits that main challenge

in the writ petitions filed by petitioners was that no
38

Transit Fee can be levied on finished products from the

stone crusher. It is contended that river bed materials

i.e. boulders and bajri by applying mechanical process

are converted into small size stone grits, chips and dust

which become a commercial commodity and ceases to be a

Forest Produce therefore no Transit Fee can be charged.

It is further contended that in Section 2(4)(b) of the

1927 Act the words ‘found in’ and ‘brought from’ are

qualified by word ‘when’, which denotes the time factor.

The word ‘when’ signifies that the item while leaving the

forest is in continuous process of transit from the point

where it is said to be found in. But once, the continuous

transit of forest produce terminates at any point of

place which is not a forest item included in Clause B(4)

(2), shall cease to be a Forest Produce and further

transit of such material being material not brought from

forest shall not attract tax under Section 41 of Act,

1927.

54. The stone or sand which is in its primary or

dominantly primary state is subjected to a manufacturing

process for making it marketable product, which is not a
39

Forest Produce. Act, 1927 does not provide for any

definition of term ‘Manufacturing Process’. The term

‘Manufacturing Process’ is to be given a liberal

interpretation. The process of stone crushing have to be

held to be Manufacturing Process. It is further contended

that levy of Transit Fee on Transit Pass does not have

any relationship with the distance of the destination of

the transit and the Transit Pass originally issued at the

time of First Sale of transit required only on

endorsement and the insistence of levy of Transit Fee at

the time of second transit is irrational and

unreasonable.

55. Learned counsel for the State of U.P, challenging

the judgment of High Court of Uttarakhand has also raised

the similar submissions as has been raised by the learned

counsel for the State of Uttarakhand.

VII. SUBMISSIONS RELATING TO JUDGMENTS OF THE
ALLAHABAD HIGH COURT.

56. Following are various submissions on behalf of

several writ petitioners and their reply by State:­

(i) (a)The products which are being transited by them
40

or on their behalf are not Forest Produce since they

have undergone manufacturing process resulting into a

new commodity. All the writ petitioners supported the

judgment of Uttarakhand High Court dated 01.07.2004 in

M/s Kumaon Stone Crusher wherein, the High Court has

held that no levy of Transit Fee can be made on the

finished items of stone i.e. stone grits, sand grits

chips etc. They submitted that in the stone crusher,

factories, boulders and stones obtained from different

mining lessees are subjected to a process by which

different items are formed thereby losing their

character of Forest Produce. Several other materials

like lime stone, fly ash, clinker, calcium hydro­oxide

and calcium oxide, cinder, gypsum are also obtained

after undergoing a manufacturing process, which are no

longer a forest produce. Another group of petitioners

who deal with marble stone, stone slabs and tiles also

raise similar submission that marble slabs are finished

goods which are different from Forest Produce and no

Transit Fee can be demanded.

(b)Another group of petitioners who deal with in
41

veneer, plywood also claimed that after undergoing

manufacturing process veneer and plywood are no longer

a Forest Produce hence, no Transit Fee can be charged.

Last category of articles for which non­leviability of

transit fee is claimed comprises of coal, hard coke,

finished coal, coal briquettes, soft­coke. With regard

to coal it is submitted that coal is not a Forest

Produce at all, since it is obtained from collieries

which are not in forest. It is further submitted that

in view of Mines and Minerals (Development

Regulation) Act, 1957 (hereinafter referred to as ‘MMDR

Act, 1957) and Coal Bearing Areas (Acquisition

Development) Act, 1957, the regulation of coal is

outside the Indian Forest Act, 1927 (hereinafter

referred to as ‘Act, 1927’).

(c)The above submissions of writ petitioners have

been refuted by learned counsel appearing for State of

U.P. and State of Uttarakhand. It is submitted that

stone boulders and stone ballasts after being subjected

to crushing by which stone grits, sand grits chips

are obtained, does not in any manner change the nature
42

of product. Stone grits, sand grits chips obtained

after crushing are still a Forest Produce on which

Transit Fee is charged. Accepting the aforesaid

argument will lead to a situation where State shall

lose its regulatory power on Forest Produce on mere

facial change of the Forest Produce. With regard to

other articles the State has refuted the submission and

it is submitted that all the articles claimed by the

writ petitioners are Forest Produce which are subject

to Transit Fee.

(d)With regard to parliamentary enactments relating

to coal as claimed by the writ petitioners, it is

submitted that parliamentary enactments regarding coal

are on different subjects and has no effect on the Act,

1927 and the rules framed therein.

(e)Learned Additional Advocate General of the State

of U.P., during his submission has submitted that in so

far as, fly ash, clinker and synthetic gypsum are

concerned, the State does not claim them to be Forest

Produce and no Transit Fee shall be charged on fly ash,

clinker and synthetic gypsum. He, however, submitted
43

that gypsum is a naturally mined Forest Produce and

what is excluded is only synthetic gypsum.

(f)For veneer and plywood, it is submitted that

veneer is small pieces of timber which remains a Forest

Produce and plywood is also a kind of timber which

retains its natural character of Forest Produce. With

other articles, with regard to which, it is claimed

that by manufacturing process and chemical treatment

they are transformed to new commercial commodity is

refuted by counsel for the State.

(ii) (a)One of the the main planks of attack of learned

counsel for the writ petitioners to the 1927 Act 1978

Rules is based on 1957 Act. It is submitted that 1957 Act

is enacted by the Parliament in reference to Entry 54 of

List I of Seventh Schedule of the Constitution of India.

It relates to regulation of mines and the development of

minerals to the extent to which such regulation and

development under the control of the Union is declared by

the Parliament by law. The legislative competency of the

State with regard to mines and minerals development is

contained in Entry 23 of List II which Entry is subject
44

to provisions of List I with respect of mines and

minerals development under the control of the Union of

India. It is submitted that in so far as transit fee on

minerals is concerned, the entire field is covered by

1957 Act wherein there is a declaration by the Parliament

that Union shall take under its control the regulation of

mines and the development of minerals to the extent

provided therein. The entire regulation of minerals

including its transport being covered under 1957 Act, the

State is denuded of any jurisdiction to legislate. It

is further contended that 1957 Act is a special enactment

which shall override the 1927 Act which is a general

enactment. It is further contended that provisions of

1978 Rules and the provisions of Section 41 of Forest

Act, due to the repugnancy to the provisions of 1957 Act

shall stand overridden. The transit and transportation of

minerals is an integral part of regulation and

development of minerals and the Parliament having

unequivocally enacted the law it is to occupy the entire

field regarding the transit and transportation of

minerals and development of mines. No other law can
45

trench upon occupied field. The provision of Forest Act,

1927 including Section 41 and Transit Fee Rules, 1978

framed thereunder shall stand impliedly repealed after

enactment of 1957 Act, especially after insertion of

Section 4(1A) and Section 23C by Act 38 of 1999 with

effect from 18.12.1999.

(b)Learned counsel for the State refuting the above

submissions contends that repugnancy between a

parliamentary statute and a statute of State

legislature arises when the two laws operate in the

same field, they collide with each other. It is

submitted that subject matters of 1927 Act and 1957 Act

are distinct and different. In 1927 Act provisions

relating to transport of forest produce is only

incidental and ancillary in nature. The object of two

legislations is entirely different. Forest Act, 1927

comprehensively deals with forest and forest wealth

whereas 1957 Act deals with mines and minerals wealth.

He further submits that 1957 Act does not impliedly

overrule the 1927 Act, both the legislations being

under different subjects. It is submitted that argument
46

of implied repeal could have arisen only where there is

no option. To take a view that 1957 Act shall impliedly

overrule 1927 Act regarding transit of forest­ produce,

the control of the State under Section 41 shall be lost

and the very purpose and object of the Forest Act shall

be defeated. An activity of mining held in a forest

cannot be regulated and prevented by mining officers in

the forest area, they cannot enter into forest area and

exercise their powers. The machinery for enforcement of

forest laws and the mining laws are different. Their

powers are different, officers are different,

consequences of breach are different and both

provisions operate in different fields. It is thus

submitted that the provisions of Indian Forest Act,

1927 in so far as Section 41 of 1927 Act and 1978 Rules

are concerned, shall not stand impliedly overruled by

Parliamentary enactment of 1957 Act.

(iii) (a)It is submitted that Division Bench of the

Allahabad High Court in Kumar Stone Works and others by

its judgment dated 27.04.2005 has mis­interpreted the

words ”brought from” as contained in Section 2(4)(b) of
47

1927 Act. It is submitted that there is no issue with

regard to the words ”found in”. The words “found in”

clearly mean found in a forest. The word “when” signifies

the physical presence of the item. The word ‘when’ also

qualifies the words “brought from a forest”. Thus when a

forest produce is brought from a forest, the things

mentioned in sub­clause (1) of sub­section (4) of Section

2 will be treated as forest produce. The thrust of the

submission is that the words ‘brought from forest’, mean

that the forest produce originated from forest. For any

produce to be forest to be brought from forest means it

is starting point of transit and not in transit. The

Division Bench of the High Court in its judgment dated

27.04.2005 erred in equating the words “brought from

forest” as “brought through forest”. The High Court has

held that even forest produce passes through forest area

it shall be liable to payment of transit fee.

(b)It is further submitted by the learned counsel

for the writ petitioners that in fact the Division Bench

of the Allahabad High Court wide its order dated

04.03.2008 in M/s. Nagarjuna Construction Ltd. has
48

already expressed its disagreement with the Division

Bench judgment in Kumar Stone Works and others v. State

of U.P. and others, 2005 (3) AWC 2177, and referred

following two questions for consideration of the larger

Bench:

(i) Whether the words ‘brought from’
used in section 2(4)(b) of the
Indian Forest Act would cover such
items mentioned in sub­clauses (i)
to (iv) of Section 2(4) (b) which
though did not have origin in the
forest but they are transported
through a forest?

(ii) Whether the interpretation of the
words ‘brought from’ given by
Division Bench in Kumar Stones
Case(Supra) is correct? Let the
papers be placed before the
Hon’ble Chief Justice for
appropriate orders.”
(c)It is submitted that the Division Bench of

Allahabad High Court while delivering the judgment dated

11.11.2011 although noticed that the above questions have

been referred to for consideration of a larger Bench did

not await the judgment of larger Bench rather chose to

follow the Division Bench judgment in Kumar Stone Works.

(d)Learned counsel for the State has refuted the
49

aforesaid submission. It is submitted that the Division

Bench of the Allahabad High Court in Kumar Stone Works

has correctly held that the term ‘brought from a

forest’ must be read to mean ‘brought through a

forest’. It is submitted that any other interpretation

would render the term to be in conflict with the term

‘found in a forest’. It is submitted that the High

Court has referred to various dictionary meanings of

word ‘brought’ and after relying on said definition the

Division Bench held that the words ‘brought from’ mean

‘brought through forest’.

(iv) (a)One more submission which has been raised by the

writ petitioners is that the word ‘forest’ as used in

1927 Act as well as in Transit Fee Rules, 1978 has to be

read as ‘forest’ as enumerated in the 1927 Act, i.e., a

reserved forest, a village forest and a protected forest.

Thus, transit fee can be charged only when forest produce

transit through a reserved forest, a village forest or a

protected forest. It is submitted that the Division Bench

in its judgment dated 11.11.2011 has adopted a very

expensive definition of forest when it held that the
50

forest has to be understood as a large track of land

covered with trees and undergrowth usually of

considerable extent, on the principles of sound

ecological and scientific basis reflecting sociological

concerns. Learned counsel for the petitioners submits

that the definition of forest as adopted by the Division

Bench of Uttarakhand High Court in M/s. Gupta Builders in

Writ Petition No.993 of 2004 giving rise to C.A.No. 1008

of 2011(State of Uttar Pradesh vs. M/s. Gupta Builders

Ors.) is a correct definition of forest. It is submitted

that Uttarakhand High Court has rightly adopted a

restrictive meaning of forest in the Forest Act, 1927.

(b)The above submission of learned counsel for the

petitioners is opposed by the State of U.P. It is

submitted by learned senior counsel that the word

‘forest’ has to be understood broadly and the definition

of forest as given by this Court in T.N. Godavarman

Thirumulkpad vs. Union of India and others, 1997 (2) SCC

267, is to be followed and the Division Bench in its

judgment dated 11.11.2011 has correctly interpreted the

word ‘forest’.
51

(v) (a)Some of the writ petitioners have submitted that

although they are not passing through any forest but

still transit fee is charged by the State on the ground

that several State highways, PWD roads and several roads

have been declared protected forests by the State of U.P.

by issuing notification under the provisions of 1927 Act.

It is submitted that passing through National highways

and State highways cannot be treated akin to passing from

any kind of forest so as to attract leviability of

transit fee.

(b)Learned Additional Advocate General for the

State of U.P. submits that the roads from which the

petitioners claim to have passed are roads which have

been declared as protected forests. Hence, forest

produces transiting from the above roads are liable to

pay transit fee. In support of his submission he refers

to notification dated 10.02.1960 issued under proviso

to sub­section (3) of Section 29 as well as Section 80A

of 1927 Act.

(vi) (a)One of the submissions raised by learned

counsel for the petitioner is that Rule 3 read with
52

Schedule A of 1978 Rules is totally independent of Rule

5 and same has no correlation with each other. Rule 3

and Schedule A nowhere contemplates or has a column

prescribing charging of a fee. It is submitted that

transit fee is chargeable on transit pass issued under

Rule 4(b) which is required to be checked under Rule

6(4) only. Referring to Rule 5, it is submitted that

Rule 5 contemplates charging a fee in those cases in

which transit is done on the transit pass issued under

Rule 4(1)(b) and checked under Rule 6(4).

(b)It is submitted that fee cannot be charged in

any other case. The above submissions have been refuted

on behalf of the State. It is contended that on all

transit pass issued under the Rule 1978 transit fee is

required to be paid.

(vii) The petitioners further submitted that although

no final notification has been issued under Section 20 of

1927 Act but still the Forest Department treats several

areas in the District of Sonebhadra and other Districts

as forest area and transit fee is asked for treating the

said areas as forest area. It is submitted that Section 4
53

notification is only a preliminary notification which

cannot be treated as notification declaring the area as

reserved forest.

(viii) (a)Learned counsel for the petitioners submitted

that the Constitution Bench judgment of this Court in

State of West Bengal vs. Keshoram Industries and ors,

(2004) 10 SCC 201 where Constitution Bench held that

Union’s power to regulate and control does not result in

depriving the States of their power to levy tax or fees

within their legislative competence without trenching

upon the field of regulation and control of the Union,

need not be relied on.

(b)The Constitution Bench also interpreted Seven­

Judge Bench decision in Synthetics and Chemicals Ltd etc

vs. State of U. P. and ors., (1990) 1 SCC 109. It is

submitted that with regard to the interpretation put by

the Constitution Bench in State of West Bengal vs.

Keshoram Industries (supra) a reference has already been

made to a Nine Judge Bench by reference order dated

30.03.2011 in Mineral Area Development Authority vs.

Steel Authority and India Ors., (2011) 4 SCC 450.
54

(ix) The State of U.P. cannot realize transit fee as

per Third Amendment Rules dated 09.09.2004. Third

Amendment Rules having been substituted by Fourth

Fifth Amendment Rules and Fourth Fifth Amendment

Rules having been struck down by judgment dated

11.11.2011, Third Amendment Rules shall not revive.

Third Amendment Rules are not in existence.

VIII. Following are the submissions on behalf of
State of U.P. in support of Civil Appeals
filed by them and their reply by the writ
petitioners thereto:­

57. Shri Ravindra Srivastava, learned senior counsel

leading the arguments on behalf of the State of U.P.

contends that this Court in State of U.P. and others vs.

Sitapur Packing Wood Suppliers and others, 2002(4)SCC

566, has upheld the validity of 1978 Rules and has

pronounced that transit fee is a regulatory in nature and

for regulatory fee quid pro quo is not necessary. The

High Court for its judgment has relied on Jindal

Stainless Ltd.(2) and Anr. Vs. State of Haryana and Ors.,

2006 (7) SCC 241, which has been overruled by 9­Judges

Constitution Bench in Jindal Stainless Ltd. Anr. v.
55

State of Haryana Ors., 2016(1) Scale 1, the very basis

of the judgment of the High Court is knocked out. The

State being entitled to levy transit fee it can change

the basis of levy of transit fee. That option on the

basis of advalorem is also permissible both for fee and

tax and no exception can be taken to the Fifth Amendment

on the ground that the Fifth Amendment adopts advalorem

basis for fixing the fee. The increase in transit fee by

Fourth and Fifth Amendments cannot be held to be

arbitrary or excessively disproportionate. The finding of

the High Court that the State had not provided any data

to justify the increase in transit fee is incorrect since

the State had in fact by a table which itself has been

noted in paragraph 85 of the judgment has mentioned the

income and expenditure related to transit fee, a perusal

of which could indicate that the expenditure of State

Government was much more than collection of transit fee

even after Fifth Amendment. The value of timber and other

forest­produce has increased manifold. The increase in

levy of transit fee had become necessary to meet the ever

increasing expenditure incurred by the State. The High
56

Court committed error in striking down Fourth and Fifth

Amendments without there being any sufficient and valid

ground.

58. Learned counsel for the writ petitioners have

vehemently opposed the above submission and supported the

judgment of the High Court striking down the Fourth and

Fifth Amendment Rules. It is submitted that Jindal

Stainless (2) overruled by the judgment of 9­Judges

constitution Bench does not have much bearing in the

facts of the present case. The High Court independent of

reliance placed on Jindal Stainless (2) has held that

transit fee is excessive in nature and the State of U.P.

had not produced data for justifying the increase in the

transit fee. It is true that for regulatory fee quid pro

quo is not to be proved but the State was obliged to

prove a broad correlation between the levy of transit fee

and the expenditure incurred by the State on the transit

of forest­produce. The High Court in paragraph 177 to 186

has considered the issue in detail and has returned

findings to support its conclusion that exorbitant

increase in transit fee has robbed the regulatory
57

character of the transit fee which has become

confiscatory and has partaken character of tax. The

figures given in paragraph 85 of the judgment are figures

of expenditure of the entire forest department which can

have no correlation with the collection of transit fee.

The entire expenditure of the forest department cannot be

met by collection of transit fee. The State does not give

any detail of expenditure which it has actually incurred

in regulation of transit of the forest­produce.

59. Learned counsel for the writ petitioners have

demonstrated by different charts of the respective

increase in the transit fee by Fourth and Fifth

Amendment Rules as compared to fee which was being

charged under Third Amendment Rules. It is submitted

that regulatory fee could not have been charged on

advalorem basis which is generally adopted for levying

a tax and not a fee. The charging of transit fee by

Fourth and Fifth Amendment Rules, is for the purposes

of augmenting the Revenue of the State and not for

regulation of transit which changes the character of

transit fee into a tax, which is not permissible under
58

law.

60. After noticing the respective submissions of both

parties, we now proceed to consider them in the same

seriatum.

IX. Whether by Manufacturing process/chemical
Treatment as claimed by the writ petitioners,
the forest produce looses its character of
forest produce.

61. We first take the case of writ petitioners of stone

boulders which are crushed into stone grits, stone

chips and stone dust etc. Stone boulders are obtained

from riverbed, stone rocks stone mines. After

crushing of the stone boulders, stone grits, stone

chips and stone dust are obtained which does not

transform into any new commodity, except that the stone

in smaller pieces and shapes are obtained. The

Allahabad High Court, in its judgment in Kumar Stone

Works (Supra) decided on 27.04.2005 has given a

detailed reasoning for not accepting stone grits, stone

chips and stone dust as a new commodity. It held that

the character of Forest Produce is not lost by such
59

crushing of the stone. High Court of Uttarakhand has

taken a contrary view in its judgment dated 01.07.2004

in Kumaon Stone Crusher (Supra), as noted above.

62. Learned counsel for the writ petitioners have

relied on few judgments of this Court which need to be

noticed. Reliance is placed on Two Judge Bench in

Suresh Lohiya vs. State of Maharashtra and another,

(1996) 10 SCC 397. In the above case, the question for

consideration was, as to whether, the Bamboo mat is a

Forest Produce. The definition of ‘Timber’ and ‘tree’,

given in sub clause 6 and sub clause 7 of Section 2 was

noticed which is to the following effect:

“2. (6) ‘timber’ includes trees when they
have fallen or have been felled, and all
wood whether cut up or fashioned or hol­
lowed out for any purpose or not; and

2.(7) ‘tree’ includes palms, bamboos,
stumps, brushwood and canes.”

63. The above judgment of this court was based on ‘con­

sideration of definition of timber and tree’ as given

in Section 2 (6) 2 (7). This Court held that defini­

tion of timber included tree and all wood whether cut

or fashioned or hollowed out for any purposes. This
60

Court held that said definition of timber cannot be

read in definition of tree which includes Bamboo hence,

fashioned Bamboos are not included in the definition of

tree. The Bamboo mat was thus held, not to be a Forest

Produce. The above judgment was based on its own facts

and does not help the writ petitioner in the present

case.

64. In CST vs. Lal Kunwa Stone Crusher (P) Ltd.,

(2000) 3 SCC 525, the Court was considering liability

of Trade Tax on stone chips, gittis and stone ballast.

The question raised before the Court was, as to

whether, the stone gittis, sand chips and dust continue

to be stone grits, chips and dust or after crushing

them, they get converted into a new commercial prod­

ucts, so as to attract the tax on their sale. The case

of dealer was that at the time of purchase of goods

sales tax has been paid hence, goods emerging out of

same are not liable to be taxed again. This Court held

that the word ‘stone’ is wide enough to accept various

forms of grits, gitti, kankar and ballast hence, no tax
61

was leviable on the sand chips, grits dust etc. In

para 5 following was held:

“5. The view taken by the Tribunal as af­
firmed by the High Court is that the goods
continue to be stone and they are not com­
mercially different goods to be identified
differently for the purposes of sales tax.
The decision relied on by the minority
view in the Tribunal in Reliable Rocks
Builders Suppliers v. State of Karnataka
turned on the concept of consumption of
goods for the purpose of bringing into ex­
istence new goods. In that case the Court
was not concerned with an entry of the na­
ture with which we are concerned in the
present case. Where the dealer had brought
into existence new commercial goods by
consuming the boulders to bring out small
pieces of stone, it was held that such ac­
tivity attracted purchase tax. In the
present case, however, stone, as such, and
gitti and articles of stones are all of
similar nature though by size they may be
different. Even if gitti, kankar, stone
ballast, etc. may all be looked upon as
separate in commercial character from
stone boulders offered for sale in the
market, yet it cannot be presumed that En­
try 40 of the notification is intended to
describe the same as not stone at all. In
fact the term “stone” is wide enough to
include the various forms such as gitti,
kankar, stone ballast. In that view of the
matter, we think that the view taken by
the majority of the Tribunal and affirmed
by the High Court stands to reason. We
are, therefore, not inclined to interfere
with the same.”
62

65. The above judgment held that the nature and charac­

ter of the stone remains the same, even after, crushing

the boulders into small stones, dust etc. Reliance by

the writ petitioner is also placed on judgment in

(2003) 3 SCC 122, Tej Bahadur Dube (Dead by Lrs.) vs.

Forest Range Officer F. S. (S.W.), Hyderabad. In the

above case, the appellant was charged for violation of

Rule 3 to 7 of the A.P. Sandalwood and Red Sanderswood

Transit Rules, 1969. The assessee was found transport­

ing finished sandalwood products. He was charged with

the violation of aforesaid rules. Assessee’s case was

that he has obtained permission of the authorities for

converting sandalwood purchased by him into various

types of handles which are ultimately used in other

sandalwood handicrafts. This Court held that sandalwood

products which have been converted into such products

after obtaining proper permission was not prohibited,

in para 6 following was held:

“6. As noticed above, the original appel­
lant was a holder of a licence to deal in
and stock sandalwood. From the material on
record, it is seen that the said appellant
63

had obtained necessary permit from the
competent authorities for converting the
sandalwood purchased by him into various
types of handles which are ultimately used
in other sandalwood handicrafts which per­
mission was valid up to 31­12­1982 period
covering the period of seizure. The appel­
lant had contended that it is pursuant to
the said permission he had converted the
sandalwood pellets into handles to be used
in the other sandalwood artefacts and he
had informed the authorities concerned
about such conversion as per Exts. P­18 to
P­27. It is also the case of the appellant
that converted sandalwood artefacts or
parts thereof do not require any transit
permit and it is only sandalwood in its
original form or chips and powder of san­
dalwood which requires a transit permit.
The trial court has agreed with this sub­
mission of the appellant. We also notice
under the Rules and the Act what is pro­
hibited is the transportation of sandal­
wood as defined in Section 2(o) of the Act
and not sandalwood products which have
been converted into such products after
obtaining proper permission from the au­
thorities. Such converted sandalwood prod­
ucts under the Rules do not require any
transit permit. We say so because the
Rules referred to in these proceedings do
not contemplate such transit permit and
the respondents have not produced any
other Rules to show such transit permit is
required. On the contrary, the respondent
argues that even converted sandalwood
products require transit permit because
they remained to be sandalwood as contem­
plated under Section 2(o) of the Act. In
the absence of any specific rules or pro­
visions in the Act to this effect, we are
64

unable to agree with this argument. We are
of the opinion that once sandalwood is
subjected to a certain process from which
a sandalwood product is lawfully obtained,
then such product ceases to be sandalwood
as understood in Section 2(o) of the Act.”

66. The above case also does not lend any support to

the case of writ petitioners. In the above case, appel­

lant had obtained permission of the competent authority

for converting the sandalwood into various types of

handles hence, the transportation was not found viola­

tive of rules.

67. In this context, it is necessary to refer to a

Three Judge Bench Judgment of this court in Karnataka

Forest Development Corporation Ltd. vs. Cantreads Pri­

vate Limited and others (1994) 4 SCC 455. This Court

had occasion to consider Karnataka Forest Act, 1963.

Caoutchouc or latex covers natural covering sheets of

various grades or not, was the question under consider­

ation. After noticing the various dictionary meanings

of caoutchouc, it was held that since processing does

not result in bringing out a new commodity but it pre­

serves the same and rendered it fit for markets, it
65

does not change its character hence, it remained a For­

est Produce. Thus rubber sheets converted from

caoutchouc continue to be a Forest Produce. In the

above case, this court has also held that a ‘test of

commercial parlance’ by considering entries in sales

tax is not applicable while considering the definition

of Forest Produce.

68. The Court observed that the definition of Forest

Produce is in technical or botanical sense. The above

judgment fully supported the contention of the State

that while considering the definition of the Forest

Produce, scientific and botanical sense has to be taken

into consideration and commercial parlance test may not

be adequate in such cases.

69. We thus are of the view that judgment of Division

Bench of the Allahabad High Court dated 27.04.2005 in

Kumar Stone Works deserved to be approved and judgment

of Uttarakhand dated 01.07.2004 in Kumaon Stone Crusher

deserves to be set aside in so far as above aspect is

concerned.
66

70. Now, we come to the case of marble slabs tiles,

chips etc. Writ Petitioners have placed reliance on

Three Judge Bench Judgment in Income Tax Officer,

Udaipur vs. Arihant Tiles and Marbles Private Limited,

(2010) 2 SCC 699. The question of consideration in the

above case was that whether conversion of raw marbles

blocks into final products or polished marble slabs or

tiles in factory constitute ‘manufacture or production’

so as to entitle the assessee relief under 80­1A(2)

(iii). This Court held that process which was applied

by the assessee will come in the category of ‘manufac­

ture or production’. In para 16 of the judgment follow­

ing was stated:

“16. In the present case, we have ex­
tracted in detail the process undertaken
by each of the respondents before us. In
the present case, we are not concerned
only with cutting of marble blocks into
slabs. In the present case we are also
concerned with the activity of polishing
and ultimate conversion of blocks into
polished slabs and tiles. What we find
from the process indicated hereinabove is
that there are various stages through
which the blocks have to go through before
they become polished slabs and tiles. In
the circumstances, we are of the view that
67

on the facts of the cases in hand, there
is certainly an activity which will come
in the category of “manufacture” or “pro­
duction” under Section 80­IA of the Income
Tax Act.”

“Regulation of mines and mineral
development to the extent to which such
regulation and development under the
control of the Union is declared by
Parliament by law to be expedient in the
public interest.”

84. List II also contains Entry 23 which relates to

regulation of mines and mineral development. Entry 23

List II is as follows:
73

“Regulation of mines and mineral
development subject to the provisions of
List I with respect to regulation and
development under the control of the
Union.”

85. Entry 23 of List II has been made subject to

provisions of List I. The Parliamentary legislation in

reference to Entry 54 to the extent regulation and

development of minerals declared under control of the

Union of India is extracted from the legislative field of

the State.

86. The writ petitioners contend that State is denuded

with legislative competence regarding mineral, its

regulation or transportation. Learned counsel for the

writ petitioners have referred and relied on the various

pronouncements of this Court in reference to

Parliamentary enactment 1957. It is not necessary to

refer to a large number of cases of this Court on the

subject, the reference of only few of such cases shall

serve the purpose for the present case.

87. The Constitution Bench judgment of this Court in

Hingir­Rampur Coal Co., Ltd. and others vs. The State of
74

Orissa and others, AIR 1961 SC 459, needs to be noted.

The State of Orissa has enacted Orissa Mining Areas

Development Fund Act, 1952 by which levy and demand was

raised. The appellant challenged the enactment on the

ground that legislation covers the same field which was

occupied by 1957 Act referable to Entry 54 of List I.

Considering the submission of the appellant, the

Constitution Bench stated following:

“23…..If Parliament by its law has
declared that regulation and development
of mines should in public interest be
under the control of the Union, to the
extent of such declaration the
jurisdiction of the State Legislature is
excluded. In other words, if a Central
Act has been passed which contains a
declaration by Parliament as required by
Entry 54, and if the said declaration
covers the field occupied by the impugned
Act the impugned Act would be ultra
vires, not because of any repugnance
between the two statutes but because the
State Legislature had no jurisdiction to
pass the law. The limitation imposed by
the latter part of Entry 23 is a
limitation on the legislative competence
of the State Legislature itself. This
position is not in dispute.

88. The validity of 1957 Act was considered in the

context of Industries (Development and Regulation)
75

Act,1951 and Mines and Minerals(Development and

Regulation) Act, 1948. This Court repelled challenge to

the 1952 Act on the ground that the declaration under

1948 Act was not referable to Entry 54.

89. The next judgment which needs to be considered is

State of Orissa vs. M.A. Tulloch and Co., 1964(4)SCR 461.

Orissa Mining Areas Development Fund Act, 1952 came for

consideration in reference to Mines and Minerals

(Development and Regulation) Act, 1957. This Court held

that 1952 Act was enacted by virtue of legislative power

under Entry 52 of List II whereas 1957 Act was enacted in

reference to Entry 54 of List I. This Court held that

Central Act 1957 contained a declaration as contained in

Section 2 which is to the following effect:

“Section 2.Declaration as to the
expediency of Union control.­ It is hereby
declared that it is expedient in the
public interest that the Union should take
under its control the regulation of mines
and the development of minerals to the
extent hereinafter provided.”

90. After noticing the above declaration, this Court

laid down following:
76

“It does not need much argument to realise
that to the extent to which the Union
Government had taken under “its control”
the regulation and development of
minerals” so much was withdrawn from the
ambit of the power of the State
Legislature under Entry 23 and legislation
of the State which had rested on the
existence of power under that entry would
to the extent of that “control” be
superseded or be rendered ineffective, for
here we have a case not of mere repugnancy
between the provisions of the two
enactments but of a denudation or
deprivation of State legislative power by
the declaration which Parliament is
empowered to make and has made.”

91. This Court further held that intention of the

Parliament was to cover the entire field. The Court held

that after enactment of 1957 Act, 1952 Act shall

disappear. This Court, thus, upheld the demands which

were raised for the period upto June, 1958.

92. There cannot be any dispute to the proposition as

laid down in the above noted cases and several other

subsequent judgments of this Court reiterating the above

proposition. The ratio laid down above, however, is not

attracted in the facts of the present case. The present

is not a case where the legislation, 1927 Act and Rules
77

1978 are referable to Entry 23 of List II. The present is

a case where we are concerned with a pre­constitutional

legislation which is 1927 Act which has been continued as

per Article 372 of the Constitution. Article 372

sub­clause (1) is as follows:

“372.Continuance in force of existing laws
and their adaptation.­ (1) Notwithstanding
the repeal by this Constitution of the
enactments referred to in Article 395 but
subject to the other provisions of this
Constitution, all the laws in force in the
territory of India immediately before the
commencement of this Constitution shall
continue in force therein until altered or
repealed or amended by a competent
legislature or other competent authority.”

93. The law which has been continued in force by virtue

of Article 372 is to continue until altered or repealed

or amended by a competent legislature. Several

pre­constitutional laws which have been continued under

Article 372 came before this Court for consideration

wherein Article 354 was also considered.

94. A Constitution Bench of this Court in B.V. Patankar

and others vs. C.G. Sastry, AIR 1961 SC 272, had occasion

to consider Mysore House Rent and Accommodation Control
78

Order, 1948, which was a pre­constitution law and by Part

B States (Laws) Act, 1951 extended the operation of

Transfer of Property Act, 1882 in the State of Mysore. In

the above case arguments were raised that the House Rent

and Accommodation Control Order, 1948 as extended in

Mysore from April, 1951 became repugnant and was

repealed. It was held that the pre­constitutional law

which was saved by Article 372 remained unaffected by

Article 254. Following was stated in paragraph 7:

“7. ….The argument, therefore, that as
from April 1, 1951, as a result of
repugnancy the House Rent Control Order of
1948 stood repealed must be repelled as
unsound and cannot be sustained, because
it was an existing law which was saved by
Article 372 of the Constitution and
remained unaffected by Article 254….”

95. In Pankajakshi (Dead) Through Legal Representatives

and others vs. Chandrika and others, 2016 (6) SCC 157, a

Constitution Bench of this Court had occasion to consider

a pre­constitutional law, i.e., Travancore­Cochin High

Court Act in the context of Code of Civil

Procedure(Amendment) Act, 1976. In the above case an

earlier judgment of this Court, namely, Kulwant Kaur and
79

others vs. Gurdial Singh Mann (Dead) by Lrs. And others,

2001 (4) SCC 262, came to be considered wherein this

Court had occasion to consider Section 42 of Punjab

Courts Act, 1918. This Court held that Article 254 of the

Constitution would have no application to such a law for

the simple reason that it is not a law made by the

legislature of a State but is an existing law continued

by virtue of Article 372 of the Constitution of India. In

paragraph 27 following has been held:

“27. Even the reference to Article 254 of
the Constitution was not correctly made by
this Court in the said decision in Kulwant
Kaur case. Section 41 of the Punjab Courts
Act is of 1918 vintage. Obviously,
therefore, it is not a law made by the
Legislature of a State after the
Constitution of India has come into force.
It is a law made by a Provincial
Legislature under Section 80­A of the
Government of India Act, 1915, which law
was continued, being a law in force in
British India, immediately before the
commencement of the Government of India
Act, 1935, by Section 292 thereof. In
turn, after the Constitution of India came
into force and, by Article 395, repealed
the Government of India Act, 1935, the
Punjab Courts Act was continued being a
law in force in the territory of India
immediately before the commencement of the
Constitution of India by virtue of Article
372(1) of the Constitution of India. This
80

being the case, Article 254 of the
Constitution of India would have no
application to such a law for the simple
reason that it is not a law made by the
Legislature of a State but is an existing
law continued by virtue of Article 372 of
the Constitution of India. If at all, it
is Article 372(1) alone that would apply
to such law which is to continue in force
until altered or repealed or amended by a
competent legislature or other competent
authority. We have already found that
since Section 97(1) of the Code of Civil
Procedure (Amendment) Act, 1976 has no
application to Section 41 of the Punjab
Courts Act, it would necessarily continue
as a law in force. Shri Viswanathan’s
reliance upon this authority, therefore,
does not lead his argument any further.”

96. Thus, to find out as to whether the 1927 Act and

Rules, 1978 framed thereunder survive even after

enforcement of 1957 Act, we have not to look into Article

254 but we have to find out as to whether the above

pre­constitutional law is altered or repealed or amended

by a competent legislature. To find out this competent

legislation as contemplated by sub­clause (1) of Article

372 in the context of pre­constitutional law the nature

and content of pre­constitutional law has to be found

out. There cannot be any dispute that Act, 1927 was
81

enacted to consolidate the law relating to forests, the

transit of forest­produce and the duty leviable on timber

and other forest­produce. Essentially the 1927 Act is

related to the forest. In the Constitution initially the

forest was in Entry 19 of List II. Thus, it was the State

legislature which was competent to alter or repeal or

amend the said law. Various amendments in the 1927 Act

were made by the State of U.P. in different provisions of

1927 Act in exercise of its legislative power as

conferred by List II.

97. By the Constitution (Forty­second Amendment) Act,

1976, with effect from 03.01.1977 Entry 19 was omitted

from List II and transferred in List III as Entry 17A.

Entry 17A is “Forests”. Thus, with effect from

03.01.1977, both the Parliament and the State legislature

are competent legislature within the meaning of Article

372 sub­clause (1). The question to be answered thus is

as to whether a competent legislature has altered or

repealed or amended 1927 Act.

98. Writ Petitioners have also contended that 1927 Act

in so far as Section 41 and Transit Fee Rules, 1978 are
82

concerned, stand impliedly repealed by virtue of 1957 Act

and in any view of the matter after amendment of 1957 Act

by Act 38 of 1999 by which specific provisions regarding

transport of minerals were inserted in 1957 Act, Section

4(1A) and Section 23C which were inserted with effect

from 18.12.1999.

99. Justice G.P. Singh in Principles of Statutory

Interpretation, 14th Edition, explained the implied repeal

as follows:

“There is a presumption against a repeal
by implication; and the reason of this
rule is based on the theory that the
Legislature while enacting a law has
complete knowledge of the existing laws on
the same subject­matter, and therefore,
when it does not provide a repealing
provision, it gives out an intention not
to repeal the existing legislation. When
the new Act contains a repealing section
mentioning the Acts which it expressly
repeals, the presumption against implied
repeal of other laws is further
strengthened on the principle expressio
unius est exclusio alterius. Further, the
presumption will be comparatively strong
in case of virtually contemporaneous Acts.
The continuance of existing legislation,
in the absence of an express provision of
repeal, being presumed, the burden to show
that there has been a repeal by
implication lies on the party asserting
the same. The presumption is, however,
83

rebutted and a repeal is inferred by
necessary implication when the provisions
of the later Act are so inconsistent with
or repugnant to the provisions of the
earlier Act ‘that the two cannot stand
together’. But, if the two may be read
together and some application may be made
of the words in the earlier Act, a repeal
will not be inferred…”

100. This Court in Municipal Council, Palai through the

Commissioner of Municipal Council, Palai vs. T.J. Joseph

in AIR 1963 SC 1561, has elaborated the concept of

implied repeal in following words:

“9. It is undoubtedly true that the
legislature can exercise the power of
repeal by implication. But it is an
equally well­settled principle of law that
there is a presumption against an implied
repeal. Upon the assumption that the
legislature enacts laws with a complete
knowledge of all existing laws pertaining
to the same subject the failure to add a
repealing clause indicates that the intent
was not to repeal existing legislation. Of
course, this presumption will be rebutted
if the provisions of the new act are so
inconsistent with the old ones that the
two cannot stand together. As has been
observed by Crawford on Statutory
Construction, p. 631, para 311:

“There must be what is often
called ‘such a positive
repugnancy between the two
provisions of the old and the
84

new statutes that they cannot be
reconciled and made to stand
together’. In other words they
must be absolutely repugnant or
irreconcilable. Otherwise, there
can be no implied repeal … for
the intent of the legislature to
repeal the old enactment is
utterly lacking.”

The reason for the rule that an implied
repeal will take place in the event of
clear inconsistency or repugnancy, is
pointed out in Crosby v. Patch and is as
follows:

“As laws are presumed to be
passed with deliberation, and
with full knowledge of all
existing ones on the same
subject, it is but reasonable to
conclude that the Legislature,
in passing a statute, did not
intend to interfere with or
abrogate any former law relating
to the same matter, unless the
repugnancy between the two is
irreconcilable. Bowen v. Lease
(5 Hill 226). It is a rule, says
Sedgwick, that a general statute
without negative words will not
repeal the particular provisions
of a former one, unless the two
acts are irreconcilably
inconsistent. ‘The reason and
philosophy of the rule,’ says
the author, ‘is, that when the
mind of the legislator has been
turned to the details of a
subject, and he has acted upon
it, a subsequent statute in
85

general terms, or treating the
subject in a general manner, and
not expressly contradicting the
original act, shall not be
considered as intended to effect
the more particular or positive
previous provisions, unless it
is absolutely necessary to give
the latter act such a
construction, in order that its
words shall have any meaning at
all.”

For implying a repeal the next thing to be
considered is whether the two statutes
relate to the same subject­matter and have
the same purpose. Crawford has stated at
p. 634:

“And, as we have already
suggested, it is essential that
the new statute cover the entire
subject matter of the old;
otherwise there is no indication
of the intent of the legislature
to abrogate the old law.
Consequently, the later
enactment will be construed as a
continuation of the old one.”

The third question to be considered is
whether the new statute purports to
replace the old one in its entirety or
only partially. Where replacement of an
earlier statute is partial, a question
like the one which the court did not
choose to answer in the Commissioners of
Sewers case would arise for decision.

10. It must be remembered that at the
86

basis of the doctrine of implied repeal is
the presumption that the legislature which
must be deemed to know the existing law
did not intend to create any confusion in
the law by retaining conflicting
provisions on the statute book and,
therefore, when the court applies this
doctrine it does no more than give effect
to the intention of the legislature
ascertained by it in the usual way i.e. by
examining the scope and the object of the
two enactments, the earlier and the
later.”

101. The question of repeal by implication arises when

two statutes become inconsistent to the extent that

competence of one is not possible without disobedience to

other.

102. The principles for ascertaining the

inconsistency/repugnancy between two statutes were laid

down by this Court in Deep Chand vs. State of U.P and

others, AIR 1959 SC 648. K. Subba Rao, J. speaking for

the Court stated following in paragraph 29:

“29……Repugnancy between two statutes may
thus be ascertained on the basis of the
following three principles:

(1) Whether there is direct
conflict between the two
provisions;
87

(2) Whether Parliament intended
to lay down an exhaustive code
in respect of the subject­matter
replacing the Act of the State
Legislature and

(3) Whether the law made by
Parliament and the law made by
the State Legislature occupy the
same field.”

103. The Constitution Bench in State of Kerala and

others vs. Mar Appraem Kuri Company Limited and another,

2012 (7) SCC 106, had occasion to consider when by a

subsequent enactment the case of pro tanto repeal can be

read. In the above case State of Kerala had enacted

Kerala Chitties Act, 1975. The Seventh Schedule of the

Constitution, List III Entry 7 pertains to contracts

including special forms of contracts. The Parliament

enactment, Chit Funds Act, 1982 and State legislature

Kerala Chitties Act, 1975, the subject being under

concurrent list, in paragraph 27, the Court held that

when there is a conflict in respect of a matter in the

concurrent list between Parliamentary and the State

legislations, Parliamentary legislation will pre­dominate

by virtue of non obstante clause of Article 254 and by
88

reason of Article 372 sub­clause (1). This Court held

that the legislative intent to abrogate or wipe off the

former enactment is to be looked into to find out whether

it is a case of pro tanto repeal. Following was stated in

paragraph 19:

“19. Further, the learned counsel
emphasised on the words “to the extent of
the repugnancy” in Article 254(1). He
submitted that the said words have to be
given a meaning. The learned counsel
submitted that the said words indicate
that the entire State Act is not rendered
void under Article 254(1) merely by
enactment of a Central law. In this
connection, it was submitted that the
words “if any provision of a law” and the
words “to the extent of the repugnancy”
used in Article 254(1) militate against an
interpretation that the entire State Act
is rendered void as repugnant merely upon
enactment by Parliament of a law on the
same subject.”

104. A repeal may be brought about by subsequent

legislation without any reference to the legislation

intended to be repealed, since, it matters little as to

whether repeal is done expressly or inferentially. As

noted above, 1957 Act was enacted in reference to Entry

54 of List I to provide for the regulation of mines and
89

the development of minerals whereas the subject of the

legislation under the 1927 Act was the forest, transit of

forest­produce and the duty leviable on timber and other

forest­produce.

105. It is sine qua non that both the sets of laws must

deal with “the same subject matter”. In the instant case,

under the Forest Act “transit of forest­produce” itself

is subject of primary legislation as can be seen from the

preamble and the provisions to Section 41 42 of the

Act. In contrast, the 1957 Act in view of Section 2

thereof, gives control to the Union under its control

“Regulation of Mines and Development of Minerals”. The

detailed provisions as primary legislation, deal with

regulation of mines and development of minerals (Section

4 to 17 and Section 18). For the purposes of Regulation

of Mines and Development of Minerals, it is provided that

no mining operation can be undertaken without the license

or permit as per Section 4. Provisions relating to

transport or storage are only incidental and ancillary in

nature. But the main point of difference is the subject

matter of legislation under the 1957 Act is “Regulation
90

of Mines and Development of Minerals”.

106. When the minerals are forest­produce by definition

under the 1927 Act under Section 2(4), validity of which

is not challenged, forest­produce and its transit is

altogether a different subject matter than the subject

matter governed by 1957 Act. The object of the two

legislations is different. The regulation is different.

The Forest Act comprehensively deals with forest and

forest wealth with a different object and the 1957 Act

deals with mines and mineral wealth.

107. Much emphasis has been given by the counsel for the

writ petitioners on Section 4(1A) and Section 23C.

Section 4(1A) is couched in negative as follows:

“No person shall transport or store or
cause to be transported or stored any
mineral otherwise than in accordance with
the provisions of this Act and the rules
made thereunder.”

108. Section 23C provides power of State Government to

make rules for preventing illegal mining, transportation

and storage of minerals.

109. The Rules may cover inspection, checking and search
91

of minerals at the place of excavation as well as transit

of the minerals. The Rules under Section 23C are only

incidence of regulation of minerals which is the subject

matter of the 1957 Act.

110. The 1927 Act is a comprehensive statute relating to

transit of forest­produce and the duty leviable on timber

and other forest­produce.

111. The 1927 Act provides comprehensive provisions with

regard to reserved forest, village forest and protected

forest. The forests are directly linked with environment

and ecological balance but because of large human

development, exploitation of forests and other natural

resources and deforestation, the international community

has been alarmed, several international conventions and

treaties were made including Kyoto Protocol and Paris

Convention to which India is a signatory.

112. Article 48A also inserted by the Forty­second

Amendment Act, 1976 which is to the following effect:

“48A. Protection and improvement of
environment and safeguarding of forests
and wild life.­ The State shall endeavour
to protect and improve the environment
and to safeguard the forests and and wild
92

life of the country.”

113. Article 51A of the Constitution lays down as one of

the fundamental duties that every citizen to protect and

improve the natural environment including forests, lakes,

rivers and wild life, and to have compassion for living

creatures.

114. As per the National Forest Policy, 1988 issued by

the Ministry of Environment Forests, one of the basic

objectives if the State is to ‘encourage efficient

utilization of forest produce and maximizing substitution

of wood’ and states that “the principal aim of Forest

Policy must be to ensure environmental stability and

maintenance of ecological balance including atmospheric

equilibrium, which are vital for sustenance of all

lifeforms, human, animal and plant. The derivation of

direct economic benefit must be subordinated to this

principal aim.”

115. The subjects of 1927 Act and 1957 Act are thus

distinct and separate. The 1957 Act was on development

and regulation of mines and minerals. Mines and minerals
93

are also found in forests. The definition of

forest­produce as contained in Section 2 sub­section (4)

of the Act includes peat, surface oil, rock and

minerals(including lime­stone, laterite, mineral oils,

and all products of mines or quarries).

116. The State has been empowered to regulate transit of

forest­produce under Section 41 of the Act. Regulation of

transit of forest­produce is a larger activity covering

transit of different kinds of forest­produce including

minerals. Both the legislations being on different

subject matters the provisions relating to transportation

of minerals as contained in 1957 Act can at best be said

to be incidentally affecting the 1927 Act, incidental

encroachment of one legislation with another is not

forbidden in the constitutional scheme of distribution of

legislative powers.

117. This Court has time and again emphasised that in

the event any overlapping is found in two Entries of

Seventh Schedule or two legislations, it is the duty of

the Court to find out its true intent and purpose and to

examine the particular legislation in its pith and
94

substance. In Kartar Singh vs. State of Punjab, 1994 (3)

SCC 569, paragraphs 59, 60 and 61 following has been

held:

“59….But before we do so we may briefly
indicate the principles that are applied
for construing the entries in the
legislative lists. It has been laid down
that the entries must not be construed in
a narrow and pedantic sense and that
widest amplitude must be given to the
language of these entries. Sometimes the
entries in different lists or the same
list may be found to overlap or to be in
direct conflict with each other. In that
event it is the duty of the court to find
out its true intent and purpose and to
examine the particular legislation in its
‘pith and substance’ to determine whether
it fits in one or other of the lists.
[See : Synthetics and Chemicals Ltd. v.
State of U.P.; India Cement Ltd. v. State
of T.N.”

60. This doctrine of ‘pith and
substance’ is applied when the
legislative competence of a legislature
with regard to a particular enactment is
challenged with reference to the entries
in the various lists i.e. a law dealing
with the subject in one list is also
touching on a subject in another list.
In such a case, what has to be
ascertained is the pith and substance of
the enactment. On a scrutiny of the Act
in question, if found, that the
legislation is in substance one on a
matter assigned to the legislature
enacting that statute, then that Act as
95

a whole must be held to be valid
notwithstanding any incidental trenching
upon matters beyond its competence i.e.
on a matter included in the list
belonging to the other legislature. To
say differently, incidental encroachment
is not altogether forbidden.

118. In A.S. Krishna and others vs. State of Madras, AIR

1957 SC 297 this Court laid down following in paragraph

12:

“12. This point arose directly for
decision before the Privy Council in
Prafulla Kumar Mukherjee v. The Bank of
Commerce, Ltd. [1946 74 I.A. 23 There, the
question was whether the Bengal
Money­Lenders Act, 1940, which limited the
amount recoverable by a money­lender for
principal and interest on his loans, was
valid in so far as it related to
promissory notes. Money­lending is within
the exclusive competence of the Provincial
Legislature under Item 27 of List II, but
promissory note is a topic reserved for
the center, vide List I, Item 28. It was
held by the Privy Council that the pith
and substance of the impugned legislation
begin money­lending, it was valid
notwithstanding that it incidentally
encroached on a field of legislation
reserve for the center under Enter 28.
After quoting its approval the
observations of Sir Maurice Gwyer C.J. in
Subrahmanyan Chettiar v. Muttuswami
Goundan, (supra) above quoted, Lord Porter
observed :
96

“Their Lordships agree that this passage
correctly describes the grounds on which
the rule is founded, and that it applies
to Indian as well as to Dominion
legislation.

No doubt experience of past difficulties
has made the provisions of the Indian Act
more exact in some particulars, and the
existence of the Concurrent List has made
it easier to distinguish between those
matters which are essential in determining
to which list particular provision should
be attributed and those which are merely
incidental. But the overlapping of
subject­matter is not avoided by
substituting three lists for two, or even
by arranging for a hierarchy of
jurisdictions. Subjects must still
overlap, and where they do, the question
must be asked what in pith and substance
is the effect of the enactment of which
complaint is made, and in what list is its
true nature and character to be found. If
these questions could not be asked, must
beneficent legislation would be satisfied
at birth, and many of the subjects
entrusted to Provincial legislation could
never effectively be dealt with.”

119. Further in Union of India and others vs. Shah

Govedhan L. Kabra Teachers’ College, 2002 (8) SCC 228 in

paragraph 7 following was laid down:

“7. It is further a well­settled principle
that entries in the different lists should
be read together without giving a narrow
meaning to any of them. Power of
97

Parliament as well as the State
Legislature are expressed in precise and
definite terms. While an entry is to be
given its widest meaning but it cannot be
so interpreted as to override another
entry or make another entry meaningless
and in case of an apparent conflict
between different entries, it is the duty
of the court to reconcile them. When it
appears to the court that there is
apparent overlapping between the two
entries the doctrine of “pith and
substance” has to be applied to find out
the true nature of a legislation and the
entry within which it would fall. In case
of conflict between entries in List I and
List II, the same has to be decided by
application of the principle of “pith and
substance”. The doctrine of “pith and
substance” means that if an enactment
substantially falls within the powers
expressly conferred by the Constitution
upon the legislature which enacted it, it
cannot be held to be invalid, merely
because it incidentally encroaches on
matters assigned to another legislature.
When a law is impugned as being ultra
vires of the legislative competence, what
is required to be ascertained is the true
character of the legislation. If on such
an examination it is found that the
legislation is in substance one on a
matter assigned to the legislature then it
must be held to be valid in its entirety
even though it might incidentally trench
on matters which are beyond its
competence. In order to examine the true
character of the enactment, the entire
Act, its object, scope and effect, is
required to be gone into. The question of
invasion into the territory of another
98

legislation is to be determined not by
degree but by substance. The doctrine of
“pith and substance” has to be applied not
only in cases of conflict between the
powers of two legislatures but in any case
where the question arises whether a
legislation is covered by particular
legislative power in exercise of which it
is purported to be made.”

120. Thus, even it is assumed that, in working of two

legislations which pertain to different subject matters,

there is an incidental encroachment in respect of small

area of operation of two legislations. Legislation cannot

be struck down as being beyond legislative competence nor

it can be held that one legislation repeals the other.

Thus, when we look into the pith and substance of both

the legislations, it is clear that they operate in

different field and the submission cannot be accepted

that 1957 Act impliedly repeals the 1927 Act in so far as

Section 41 and 1978 Rules are concerned.

121. We, thus, conclude that the submission of learned

counsel for the writ petitioners that in view of the 1957

Act especially as amended by Act 38 of 1999, the

provisions of 1927 Act 1978 Rules have become void,

inoperative and stand repealed, cannot be accepted.
99

XII. Interpretation of Section 2(4)(b) of 1927 Act

122. The meaning of words ‘brought from’ as used in

Section 2 sub­section (4) sub­clause (b) has become very

significant in the present case since it is a case of

large number writ petitioners that the goods which they

are transiting did not originate from any forest area

rather they have been taken from non­forest area, hence,

there is no liability to pay transit fee. Whether forest

produce as defined in Section 2 sub­section (4)

sub­clause (b) should be forest produce which originated

from forest or even the forest produces which are merely

passing through a forest area shall attract the liability

of transit fee is the question to be answered.

123. The Division Bench judgment of the Allahabad High

Court in Kumar Stone Works, although has referred to

various definitions of meaning of word ‘brought’ but it

did not advert to the fact as to what meaning has to be

attributed to word ‘from’ with which word the word

‘brought’ is prefixed. The word ‘from’ has been defined

in Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd
100

Edition in following words:

“From: As used as a function word, implies
a starting point, whether it be of time,
place, or condition; and meaning having a
starting point of motion, noting the point of
departure, origin, withdrawal, etc., as he
travelled “from” New York to Chicago. Silva V.
MacAuley, 135 Cal App. 249, 26 P.2d 887. One
meaning of “from” is “out of.” Word “from” or
“after” and event or day does not have an
absolute and invariable meaning but each
should receive an inclusion or exclusion
construction according to intention with which
such word is used. Acme Life Ins. CO. v.
White, Tex. Civ. App. 99 SW 2d 1059, 1060.
Words “from” and “to”, used in contract, may
be given meaning to which reason and sense
entitles them, under circumstances of case.
Woodruff v. Adams, 134 Cal App.490, 25 P, 2d
529.”

124. The word ‘from’ is used to denote a point of time,

a place or a period. Both the words ‘found in or brought

from’ have been used before word ‘forest’. Both the words

that is ‘found in’ and ‘brought from’, has clear nexus

with forest. The true meaning of the words ‘brought from’

has to be appreciated when read in the context of word

‘found in’. The word ‘brought from’ is an expression

which conveys the idea of the items having their origin

in the forests and they have been taken out from the
101

forest. The word ‘from’ refers to the place from which

the goods have been moved out that is from the place of

their original location. The forest is birth place, the

origin of the items mentioned in sub­clauses (1) to (iv)

of sub­clause(b) of Section 2(4). The ‘found in’ means

that the item which has origin from the forest, is found

in the forest while ‘brought from’ means that items

having origin in forest have moved out from the forest.

125. The 1978 Rules framed under Section 41 of the 1927

Act also reflect that rule making authority has also

understood the meaning of word ‘brought from’ in the

above sense. As per Rule 3 no forest produce shall be

moved to or from or within the State of U.P. except or

without a transit pass in the form in the Schedule A. The

Schedule A of the Rules contains the form. Item No.1 of

the form is as follows:

“1. Locality of origin;

(a) name and situation of forest,

(b) name of forest owner.”

126. The above Item No.1 also thus clearly refers to

locality of origin of the produce and form requires name
102

and situation of forest and name of the forest owner.

Thus, locality of origin is related to a forest which

supports the interpretation as placed by us.

127. Learned counsel for the writ petitioners have also

placed reliance on a judgment of the Division Bench of

the Karnatka High Court in Yeshwant Mony Dodamani and

Ors. (1962 CRLJ 832). The Division Bench had occasion to

consider the definition of forest produce as contained in

sub­section (4) of Section 2 of the Act. In paragraph 6

of the judgment following has been stated:

“6. On a plain reading of these expressions
‘found in’ or ‘brought from’, there can hardly
be any doubt that both of them indicate the
forest to be the source or original depository
of the forest produce in question. The learned
Government Pleader has very strenuously
contended that the expression ‘found in’ a
forest merely means ‘come across’ or
‘discovered’ in a forest irrespective of the
fact whether the article or goods so
discovered were originally sourced or
deposited or grown in a forest or some other
place which is not a forest. All that is
necessary, according to the learned Government
Pleader, is that somebody (meaning apparently
a forest officer or a forest guard or other
person acting under the authority of the Act
or Rules) finds or discovers these goods
within, the area of a forest Same argument,
however, is not available nor is it pressed
with, reference to other expression ‘brought
103

from’ a forest. It is conceded that the
expression ‘brought from’ a forest certainly
excludes the idea of a thing being brought
from outside the forest but taken through it.
It is, however, contended that if an article
so brought from outside the forest is ‘found’
i.e., discovered by somebody within a forest,
it would come within the definition. We find
it difficult to accept this argument which
places extreme strain both on the language and
upon logic. The expression at the commencement
of Clause (b) of Section 2(4) should be
compared with the expression at the
commencement of Clause (a) of Section 2(4).
The articles listed under Clause (a) become
forest­produce by virtue of their own nature,
whether they are found in a “forest or not, or
brought from a forest or not. On the other
hand, the articles listed under Clause (b)
become forest­produce, not by virtue of their
nature alone, but by virtue of the fact that
they are found in or brought from a forest.
The term ‘found in’ a forest does not
necessarily, in our opinion, require an actual
discovery of those items by a living person
before those items can become forest­produce.

In our opinion, the term ‘found in’ actually
refers to things growing in a forest like
timber trees, fuel trees, fruits, flowers etc.
or mineral deposits or stones existing in the
forest. The distinctive feature is either the
existence or the growth or deposit within the
area of a forest and not their discovery by
some living person. The idea underlying the
expression ‘brought from’ is equally emphatic
of the source of the thing so brought being
within the area of a forest. The conveyance or
transport involved in the idea of a thing
being brought undoubtedly has its beginning in
the forest by virtue of the use of the
104

expression ‘from.’”

128. We are of the view that Gujarat High Court has

correctly interpreted the word “brought from” as

occurring in clause (b) of Section 2(4). We are, thus, of

the view that the word ‘brought from’ has to be

understood in the above manner. We, however, may clarify

that the origin of forest produce may be in any forest

situate within the State of U.P. or outside the State of

U.P. Since, transit pass is necessary as per Rule 3 for

moving a forest produce into or from or within the State

of U.P. Any produce, goods entering within or the outside

the State which is the forest produce having originated

in the forest requires a transit pass for transiting in

the State of U.P. Conversely, any goods which did not

originate in forest whether situate in the State of U.P.

or outside the State but is only passing through a forest

area may not be forest produce answering the description

of forest produce within the meaning of Section 2(4)(b).

XIII. Meaning of ‘Forest’

129. Safeguarding of forest has also been recognised by
105

our Constitution under Article 48A which oblige the State

to protect and improve the environment and to safeguard

the forests and wild life of the country. Article 51A

sub­clause(g) enumerates the fundamental duty of every

citizen of India to protect and improve the natural

environment including the forests, lakes, rivers,

wildlife.

130. The Forest Conservation Act, 1980 is another

Parliamentary enactment which has been specifically

enacted to provide for the conservation of the forest and

for matters connected therewith. The definition of forest

cannot be confined only to reserved forests, village

forests and protected forests as enumerated in 1927 Act.

This Court has already held in T.N. Godavarman

Thirumulkpad vs. Union of India and others, 1997 (2) SCC

267, that the word “forest“ must be understood according

to its dictionary meaning, in paragraph 4 following is

stated:

“4….The word “forest” must be understood
according to its dictionary meaning. This
description covers all statutorily recognised
forests, whether designated as reserved,
protected or otherwise for the purpose of
106

Section 2(i) of the Forest Conservation Act.
The term “forest land”, occurring in Section
2, will not only include “forest” as
understood in the dictionary sense, but also
any area recorded as forest in the Government
record irrespective of the ownership. This is
how it has to be understood for the purpose of
Section 2 of the Act. The provisions enacted
in the Forest Conservation Act, 1980 for the
conservation of forests and the matters
connected therewith must apply clearly to all
forests so understood irrespective of the
ownership or classification thereof…”

131. Thus, forest shall include all statutorily

recognised forests, whether designated as reserve,

protected or otherwise. The term “forest land”, occurring

in Section 2, will not only include “forest” as

understood in the dictionary sense, but also any area

recorded as forest in the Government records irrespective

of the ownership. The restrictive meaning of forest as

given by the Uttarakhand High Court in M/s Gupta Builders

cannot be approved.

132. It is relevant to note that even before this

Court’s definition in T.N. Godavarman case (supra) in

expensive manner, the forest was understood by the State

legislature in a very wide manner. This is reflected by
107

definition of forest and forest land as given in Section

38A inserted by Uttar Pradesh Amendment Act 5 of 1956

with effect from 3.12.1955. The definitions of ‘forest’

as given in Section 38A(b) and ‘forest land’ in 38A(c) of

1927 Act are as follows:

“38A(b) “forest” means a track of land covered
with trees, shrubs, bushes or woody vegetation
whether of natural growth or planted by human
agency, and existing or being maintained with
or without human effort, or such tract of land
on which such growth is likely to have an
effect on the supply of timber, fuel,
forest­produce, or grazing facilities, or on
climate, stream­flow, protection of land from
erosion, or other such matters and shall
include­

(i) land covered with stumps of trees of
a forest;

(ii) land which is part of a forest or
was lying within a forest on the
first day of July, 1962;

(iii)such pasture land, water­logged or
non­cultivable land, lying within,
or adjacent to, a forest as may be
declared to be a forest by the State
Government.

38A(c) “forest land” means a land covered
by forest or intended to be utilized
as a forest;”

No.1115/XIV­331­50,­Whereas the Governor Uttar
Pradesh, is of the opinion that the making of
enquiry and record contemplated under
sub­section(3) of section 29 of the Indian
Forest Act 1927(Act no.XVI of 027), will
occupy such length of time as in the meantime
to endanger the rights of the State
Government, now therefore, in exercise of the
powers conferred by the proviso to the
aforesaid sub­section and by the
sub­section(1) of the said section, read with
section 80­A of the aforesaid Act, the
Governor of Uttar Pradesh is pleased to
declare that pending such enquiry and record
the provisions of Chapter IV of the said Act
to be applicable to the lands specified in the
schedule here to : A)

“29. Protected Forests.­(1) The [State
Government] may, by notification in
the [official gazette], declare the
provisions of this Chapter applicable
to any forest­land or waste­land which
is not included in a reserved forest
but which is the property of the
Government, or over which the
Government has proprietary rights, or
to the whole or any part of the
forest­produce of which the Government
is entitle.

(2) The forest­land and waste­lands
comprised in any such notification
shall be called a “protected forest”.
(3) No such notification shall be made
unless the nature and extent of the
rights of Government and of private
persons in or over the forest­land or
waste­land comprised therein have been
inquired into and recorded at a survey
or settlement, or in such other manner
as the [State government] thinks
sufficient. Every such record shall be
presumed to be correct until the
contrary is proved.

Provided that, if, in the case of any
forest­land or waste land, the [State
Government] thinks that such inquiry
and record are necessary, but that 112

they will occupy such length of time
as in the meantime to endanger the
rights of Government, the [State
Government] may, pending such inquiry
and record, declare such land to be a
protected forest, but so as not to
abridge or affect any existing rights
of individuals or communities.”

137. Section 80A which has been referred in the

notification is a provision which has been inserted by

U.P. Act 18 of 1951 with effect from 06.10.1951. Section

80A is as follows:

“80A. The State Government may, by
notification in the Official Gazette,
declare that any of the provisions of
or under this Act, shall apply to all
or any land on the banks of canals or
the sides of roads which are the
property of the State Government or a
local authority, and thereupon such
provisions shall apply accordingly.”

138. Under Section 80A the State Government may, by

notification declare that any of the provisions of Act

shall apply on the banks of canals or the sides of roads

which are the property of the State Government or a local

authority. Section 80A is included in Chapter XIII which

is a miscellaneous Chapter. Section 80A empowers the 113

State to declare any land on the banks of canals or the

sides of roads as protected forest on which any other

provisions of the Act can be applied. Notification dated

10.02.1960 declared that provisions of Chapter IV of the

Act shall be applied. Thus land mentioned in the schedule

is declared as protected forest.

139. Section 80A delineates the legislative scheme of

declaring protected forests of banks of canals or the

sides of roads. The State while issuing notification

under Section 80A can only effectuate, the object and

purpose of Section 80A as enacted by the State

legislature.

140. The notification dated 10.02.1960 has to be read

in the light of the substantive provisions contained

under Section 80A. When Section 80A empowers the State

to declare any land on the banks of canals or the sides

of roads as protected forests State can do only which

is permitted by the State and no more. Section 80A read

with notification dated 10.02.1960 shall only mean that

both the sides of the roads which have been mentioned

in the Schedule are now declared protected forests. The 114

purpose for such declaration is not far to seek. Both

sides of canals or both sides of the roads can be

declared as protected forests for maintenance and

management of the same by applying the different

provisions of the Act. Maintenance of forests on both

sides of canals is with the object and purpose of

environment protection. Maintenance of protected

forests on both the sides of the road is for the same

purpose and object, and also with object to combat the

vehicular pollution and to improve the environment and

ecology. By notification under Section 80A, it cannot

be accepted that road itself has been declared as

protected forest. The object is not to declare the road

as protected forest so as to apply different provisions

of 1927 Act on the roads itself. The interpretation put

by the State that roads declared by notification dated

10.02.1960 have become protected forests is not

compatible with provisions of Chapter IV. The State

cannot exercise its power under Section 30 nor any

Rules under Section 32 can be framed by the State for

the roads itself. The maintenance and regulation of 115

roads are governed by different statutes and principles

of law. We, thus, reject the submissions of learned

counsel for the the State that merely because both

sides of roads are declared protected forests, the

roads itself have become protected forests. We, thus,

conclude that merely passing through the roads as

included in the notification dated 10.02.1960, it

cannot be held that the goods or forest produce are

passing through the protected forests.

XV. Whether Rule 3 is independent of Rule 5

141. Rule 3 is couched in negative term providing that

“……no forest produce shall be moved into or from or

within the State of Uttar Pradesh except as hereinafter

provided without a transit Pass in the form in Schedule

A……”. Thus transit of forest produce is permissible only

with a transit pass. Rule 4(1) contains provisions

regarding officers and persons who issue passes. Rule

4(1) is as follows:

Officers “Rule 4.(1):The following officers and
Persons and persons shall have power to to
issue issue passes under these rules:­
passes 116

(a) For forest produce belongings to Government
or not owned by any other person, the
Conservator of Forest, the Divisional
Forest Officer, the Sub­Divisional Forest
Officer or any other officer
authorized in this behalf in
writing by conservator of Forest
or the Divisional Forest Officer;

(b) For forest produce owned by any person,
such person or his agent if so
authorized in writing by the Divisional
Forest Officer­

(i) Provided that any person who
desires to obtain a transit pass
or authorization to issue passes
under clause (b) of sub­rule(1) above
shall apply in the form in
Schedule ‘B’ and the Divisional
Forest Officer may, before issuing
the transit pass or
authorization to issue such
passes, conduct such inquiry and
call for such information as
considered necessary;

(ii)Such authorization shall specify
the period during which it shall
remain in force, and shall also
specify the route to be adopted
and check Chawki or depot through
which to produce must pass; and

(iii)Any authorization may at any time be
changed (on request or otherwise)
or cancelled by the Division Forest
Officer or Conservation of
Forests.”

142. Now we come to Rule (5) which provides for fees

payable for different passes. Rule 5 along with its 117

Marginal note (as originally framed) is as follows:

Fees Payable 5. At the check Chawki or depot
for established under rule 15 and specified
different under proviso (ii) to clause(b),
classes sub­rule (1) of rule 4, the forest
of passes produce along­with the two copies of
the pass(duplicate and triplicate)
shall be produced for examination under
sub­rule(4) of rule 6 and for payment
of transit fee on the forest produce
calculated at the following rates;

corresponding receipt shall be granted
in the form given in Schedule C­

(i) per lorry load of timber or other
forest produce ……Rs.5.00 per
tonne of
capacity

(ii) per cart load of timber or other
forest produce ……Rs. 2.50

(iii) per camel load of timber or other
forest produce ……Rs.1.25

(iv) per pony load of timber or other
forest produce ……Rs.0.50

(v) per head load of timber or other
forest produce ……Rs. 0.25”

143. Referring to Chawki or depot established under Rule

15 and specified under proviso(ii) to clause(b), sub­rule

(1) of Rule 4, learned counsel contends that transit

passes as referred to under proviso (ii) to clause(b) of

sub­rule (1) of Rule 4 are only to be charged with

transit fees.

144. Rule 4 as noticed above contains provisions 118

regarding officers and persons who have power to issue

passes. Under Rule 4(1)(a) for the forest produce

belonging to government or not owned by any other person

various officers of the forest department are authorized

to issue passes. Rule 4 clause (b) relates to various

produce own by any person. Pass can be issued by such

persons or his agents if so authorized in writing by the

Divisional Forest Officer. Any person who is referred to

in Rule 4(b) has to apply in the form in Schedule B to

the Divisional Forest Officer whereon authorization has

to be issued by the authorized Divisional officer. The

words in Rule 5 namely “…Chawki or depot established

under Rule 15 and specified under proviso(ii) to

clause(b), sub­rule (1) of Rule 4” are the words

qualifying the words chawki or depots. The fee has to be

paid for different passes at chawki or depot where it

shall be produced for examination and payment of transit

fees. All forest produces are to be produced at chawki or

depot for payment of transit fee. Reading of Rule 5 does

not indicate any intention that only one category of

passes as referred to in Rule 4(1)(b) are leviable with 119

transit fee. The words“…specified under proviso(ii) to

clause(b), sub­rule(1) of Rule 4 only refer to check

Chawki or depot where forest produce is to be produced

for examination. The Marginal Note of Rule 5 also

clarifies the intent of the Rule. The Marginal note reads

as “Fees payable for different classes of passes.” Thus

Marginal Note clarifies that transit fee is payable at

all kinds of passes and submission is incorrect that

leviablity of fee is only on one category of passes as

referred to in Rule 4(1)(b). Marginal note has been held

to be an internal aid to statutory interpretation of a

statute. Justice G.P.Singh in Principles of Statutory

interpretation 14th Edition regarding marginal note states

as follows:

“…Marginal notes appended to
Articles of the Constitution have been
held to constitute part of the
Constitution as passed by the Constituent
Assembly and therefore they have been
made use of in construing the Articles,
e.g. Article 286, as furnishing ‘prima
facie’, ‘some clue as to the meaning and
purpose of the Article’.

A note appended to a statutory
provision or subordinate legislation is
merely explanatory in nature and does not 120

dilute the rigour of the main provision.
Notes under the rules cannot control the
rules but they can provide an aid for
interpretation of those rules. Further, a
note which is made contemporaneously with
the rules is part of the rule, and is not
inconsistent with the rule, but makes
explicit what is implicit in the rule.”

145. This Court has also occasion to consider the value

of marginal note in several cases. In 2004 (2) SCC 579,

N.C.Dhoundial versus Union of India Ors., It was laid

down in paragraph 15 that heading or marginal note can be

relied upon to clear any doubt or ambiguity in the

interpretation of the provision and to listen the

legislative intent. Following was laid down in para 15:

“15….The language employed in the
marginal heading is another indicator
that it is a jurisdictional limitation.
It is a settled rule of interpretation
that the section heading or marginal note
can be relied upon to clear any doubt or
ambiguity in the interpretation of the
provision and to discern the legislative
intent (vide Uttam Das Chela Sunder Das
v. Shiromani Gurdwara Parbandhak
Committee and Bhinka v. Charan Singh).”

“Section 5. Bar of accrual of forest
rights.­ After the issue of the
notification under section 4 no right
shall be acquired in or over the land
comprised in such notification, except
by succession or under a grant or a
contract in writing made or entered
into by or on behalf of the Government
or some person in whom such right was
vested when the notification was
issued; and no fresh clearings for
cultivation or for any other purpose
shall be made in such land, nor any
tree therein felled, girdled, lopped,
tapped, or burnt, or its bark or
leaves stripped off, or the same
otherwise damaged, nor any
forest­produce removed therefrom,
except in accordance with such rules
as may be made by the State Government
in this behalf.” 124

150. Section 5 clearly provides that after the issue of

the notification under Section 4 no forest produce can be

removed therefrom, except in accordance with such rules

as may be made by the State Government in this behalf.

The regulation by the State thus comes into operation

after the issue of notification under Section 4 and thus

the submission of the petitioners that since no final

notification under Section 20 has been issued they can

not be regulated by Rules 1978 cannot be accepted.

151. We, however, make it clear that we have not entered

into the issue as to whether actually after Section 4

notification State has taken any further steps including

notification under Section 20 or not.

152. In so far as submission of learned counsel for the

writ petitioner that Constitution Bench judgment in State

of West Bengal vs. Keshoram Industries (surpa) having

been referred to a Nine Judge Bench which reference

having not been answered, the interpretation given by the

Five Judge Bench of Synthetics and Chemicals vs. State of

U. P. and ors cannot be relied, suffice it to say for the

purposes of this batch of cases it is not necessary for 125

us to rest our decision on the preposition as laid down

in Keshoram Industries. Independent of preposition as

laid down by the Constitution Bench in Keshoram

Industries there are clear pronouncement of this court

as noticed above by us for deciding the issues raised in

this batch of cases.

153. The writ petitioners have contended that in view of

striking down Fourth and Fifth Amendment Rules to 1978

Rules, the Third Amendment dated 09.09.2004 could not

have been resorted to for realising the transit fee at

the rate of Rs.38/­. The petitioners relying on judgments

of Firm A.T.B Mehtab Majid and Co. vs. State of Madras

and another, AIR 1963 SC 928; B.N. Tiwari vs. Union of

India, AIR 1965 SC 1430 and State of U.P. and others vs.

Hirendera Pal Singh, 2011 (5) SCC 305, have submitted

that the earlier Rule does not revive even when

substituted Rule is struck down by the Court. Shri D.K.

Singh, learned Additional Advocate General has refuted

the submission and placed reliance on judgment of this

Court in Supreme Court Advocate­on­record Association vs.

Union of India, 2016(5)SCC 1. This Court in the interim 126

order dated 29.10.2013 has expressly directed that “the

State shall be free to recover transit fee for forest

produce removed from within the State of U.P. at the rate

stipulated in the Third amendment to the Rules mentioned

in the earlier part of this order.” Further, after

noticing the striking down of Fourth and Fifth Amendment

Rules by the High Court, this Court in the same interim

order permitted the State to recover transit fee in terms

of the Third Amendment Rules.

154. It is, further, relevant to note that the High

Court in its judgment dated 11.11.2011 has issued

following directions in the last paragraph of the

judgment which contained operative portion as below:

“188. All the writ petitions are
consequently allowed. The Notifications dated
20.10.2010, by which the ‘U.P. Transport of
Timber and Other Forest Produce Rules, 1978’,
was amended by the 4th Amendment; and the
Notification dated 4.6.2011, by which the ‘U.P.
Transport of Timber and Other Forest Produce
Rules, 1978’ was amended by the 5th Amendment,
are quashed. It will be open to the
Respondents to impose and collect the transit
fees on such forest produce prevailing on such
rates as it was being charged prior to the 4 th
Amendment to the Rules notified on 20.10.2010,
i.e. at the rate of Rs.38/­ per tonne of
capacity per lorry load of timber or other 127

forest produce; Rs. 19/­ per tonne of capacity
per cart load of timber or other forest
produce; Rs. 1.25 per camel load of timber and
other forest produce; Rs.4/­ per pony load of
timber or other forest produce and Rs.2/­ per
head load of timber or other forest produce.
We also declare that the imposition of transit
fee on ‘Sponge Iron’ which is not a forest
produce after undergoing the process of
manufacture, converting it into a commercially
different commodity than forest produce, and
‘Tendu Patta’, the trade and transportation of
which is monopolized by the State Government,
is not valid in law, and restrain Respondents
from requiring transit passes and transit fees
on it. The costs are made easy.

Petitions allowed.

155. The High Court has thus even though had struck down

Fourth and Fifth Amendment Rules but has clearly

permitted the State to recover transit fee in accordance

with the rate as was applicable prior to Fourth Amendment

Rules. We, thus, do not find any infirmity in the State’s

recovery of transit fee at the rate of Third Amendment

Rules. There being express order by the High Court on

11.11.2011 as well as interim order by this Court on

29.10.2013 permitting the State to recover transit fee as

per the rate as was prevalent by Third Amendment Rules

prior to enforcement to Fourth Amendment Rules, we are of

the view that the question as to whether by striking 128

down Fourth and Fifth Amendment Rules, Third Amendment

Rule does not revive need not be gone into in the present

case. In view of the order of the Division Bench of the

High dated 11.11.2011, the State was fully competent to

recover the transit fee as per Third Amendment Rule,

which direction of the High Court we duly affirm.

XVII. VALIDITY OF FOURTH AND FIFTH AMENDMENT RULES

156. We now proceed to consider the respective

contentions of the parties on the Fourth and Fifth

Amendment Rules. Before we proceed to consider the rival

contentions, it is necessary to have broad over­view of

the concept of fee and tax. Further, the nature of

regulatory fee and its essential characteristic also

needs to be looked into.

157. The locus classicus on the concept of fee and tax

is the judgment of this Court in The Commissioner, Hindu

Religious Endowments, Madras vs. Sri Lakshmindra Thirtha

Swamiar of Sri Shirur Mutt, AIR 1954 SC 282, B.K.

Mukherjea, J. speaking for 7­Judge Bench has elaborately

defined the tax and fee in paragraphs 43 and 44 which are 129

quoted below:

“43. A neat definition of what “tax” means
has been given by Latham C.J. of the High
Court of Australia in Matthews v. Chicory
Marketing Board (60 C.L.R. 263, 276.).

“A tax”, according to the learned
Chief Justice, “is a compulsory
exaction of money by public authority
for public purposes enforceable by law
and is not payment for services
rendered”.

This definition brings out, in our opinion,
the essential characteristics of a tax as
distinguished from other forms of
imposition which, in a general sense, are
included within it. It is said that the
essence of taxation is compulsion, that is
to say, it is imposed under statutory power
without the taxpayer’s consent and the
payment is enforced by law (Vide Lower
Mainland Dairy v. Orystal Dairy Ltd. 1933
AC 168.).

The second characteristic of tax is that it
is an imposition made for public purpose
without reference to any special benefit to
be conferred on the payer of the tax. This
is expressed by saying that the levy of tax
is for the purposes of general revenue,
which when collected form part of the
public revenues of the State. As the object
of a tax is not to confer any special
benefit upon any particular individual,
there is, as it is said, no element of quid
pro quo between the taxpayer and the public
authority (See Findlay Shirras on “Science
of Public Finance”, Vol. p. 203.). Another
feature of taxation is that as it is a part
of the common burden, the quantum of 130

imposition upon the taxpayer depends
generally upon his capacity to pay.

44. Coming now to fees, a ‘fee’ is
generally defined to be a charge for a
special service rendered to individuals by
some governmental agency. The amount of fee
levied is supposed to be based on the
expenses incurred by the Government in
rendering the service, though in many cases
the costs are arbitrarily assessed.
Ordinarily, the fees are uniform and no
account is taken of the varying abilities
of different recipients to pay (Vide Lutz
on “Public Finance” p. 215.). These are
undoubtedly some of the general
characteristics, but as there may be
various kinds of fees, it is not possible
to formulate a definition that would be
applicable to all cases.”

158. Further, on distinction between tax and fee

following was stated in paragraphs 45 and 46:

“45…The distinction between a tax and a
fee lies primarily in the fact that a tax is
levied as a part of a common burden, while a
fee is a payment for a special benefit or
privilege. Fees confer a special capacity,
although the special advantage, as for
example in the case of registration fees for
documents or marriage licences, is secondary
to the primary motive of regulation in the
public interest (Vide Findlay Shirras on
“Science of Public Finance” Vol. I, p.

202.). Public interest seems to be at the
basis of all impositions, but in a fee it is
some special benefit which the individual
receives. As Seligman says, it is the 131

special benefit accruing to the individual
which is the reason for payment in the case
of fees; in the case of a tax, the
particular advantage if it exists at all is
an incidental result of State action (Vide
Seligman’s Essays on Taxation, p. 408.).

46. If, as we hold, a fee is regarded as a
sort of return or consideration for services
rendered, it is absolutely necessary that
the levy of fees should, on the face of the
legislative provision, be co­related to the
expenses incurred by Government in rendering
the services. As indicated in article 110 of
the Constitution, ordinarily there are two
classes of cases where Government imposes
‘fees’ upon persons. In the first class of
cases, Government simply grants a permission
or privilege to a person to do something,
which otherwise that person would not be
competent to do and extracts fees either
heavy or moderate from that person in return
for the privilege that is conferred.

A most common illustration of this type
of cases is furnished by the licence fees
for motor vehicles. Here the costs incurred
by the Government in maintaining an office
or bureau for the granting of licences may
be very small and the amount of imposition
that is levied is based really not upon the
costs incurred by the Government but upon
the benefit that the individual receives. In
such cases, according to all the writers on
public finance, the tax element is
predominant (Vide Seligman’s Essays on
Taxation, p. 409.), and if the money paid by
licence holders goes for the upkeep of roads
and other matters of general public utility,
the licence fee cannot but be regard as a
tax.” 132

159. In another Constitution Bench in Corporation of

Calcutta and Anr. vs. Liberty Cinema, AIR 1965 SC 1107,

following was stated in paragraphs 16 and 17:

“16. Both these cases discussed other tests
besides the requirement of the rendering of
services for determining whether a levy is a
fee, but with these we are not concerned in
the present case. These cases also discussed
the correlation of the costs of the services
to the levy but with also we are not
concerned as it is not sought to uphold the
present levy on the ground of such
correlation. We have referred to these cases
only for showing that to make a levy a fee
the services rendered in respect of it must
benefit, or confer advantage on, the person
who pays the levy.

20. The other case to which we wish to refer
in this connection is The Hingir­Rampur Coal
Co., Ltd. v. The State of Orissa and ors.,
[1961]2SCR537 . There the imposition by a
certain statute of a levy on lessees of coal
mines in a certain area and the creation of
a fund with it, was called in question. It
was held that the levy was a fee in return
for services and was valid. It was there
said at p. 549, “If the special service
rendered is distinctly and primarily meant
for the benefit of a specified class or
area, the fact that in benefiting the
specified class or area the State as a whole
may ultimately and indirectly be benefited
would not detract from the character of the
levy as a fee.” It may be mentioned that the
levy there went to meet expenditure
necessary or expedient for providing 133

amenities like communication, water supply
and electricity for the better development
of the mining area and to meet the welfare
of the labour employed and other persons
residing or working in the area of the
mines. Here again there is no element of
control but the services resulted in real
benefit specially accruing to the persons on
whom the levy was imposed. These decisions
of this Court clearly establish that in
order to make a levy a fee for services
rendered the levy must confer special
benefit on the persons on whom it is
imposed. No case has been brought to our
notice in which it has been held that a mere
control exercised on the activities of the
persons on whom the levy is imposed so as to
make these activities more onerous, is
service rendered to them making the levy a
fee.”

160. The nature of transit fee came for consideration

before this Court in State of Tripura and others vs.

Sudhir Ranjan Nath, 1997 (3) SCC 665. The Tripura Transit

Rules levy the transit fee. The High Court has declared

Rule 3 which provided for charging of transit fee as

unconstitutional. In appeal against the said judgment,

referring to the judgment of the Corporation of Calcutta

and Anr. vs. Liberty Cinema (supra) it was held that

expression ‘licence fee’ does not necessarily mean a fee

in lieu of services and that in the case of regulatory 134

fees, no quid pro quo need be established. Following was

held in paragraph 15:

“15. This decision has been followed in
several decisions, including the recent
decisions of this Court in Vam Organic
Chemicals Ltd. v. State of U.P., 1997 (2)
SCC 715 and Bihar Distillery v. Union of
India, 1997 (2) SCC 727. The High Court was,
therefore, not right in proceeding on the
assumption that every fee must necessarily
satisfy the test of quid pro quo and in
declaring the fees levied by sub­rules (3)
and (4) of Rule 3 as bad on that basis.
Since we hold that the fees levied by the
said sub­rules is regulatory in nature, the
said levy must be held to be valid and
competent, being fully warranted by Section

41.”

161. This Court held that transit fee is a regulatory

fee in nature.

162. In Secunderabad Hyderabad Hotel Owners’ Assn. v.

Hyderabad Municipal Corpn., 1999 (2) SCC 274, where this

Court held that a fee which is charged for regulation for

such activity would be validly classified as a fee and

not a tax although no service is rendered. In paragraph 9

following was stated:

“9. It is, by now, well settled that a
licence fee may be either regulatory or 135

compensatory. When a fee is charged for
rendering specific services, a certain
element of quid pro quo must be there between
the service rendered and the fee charged so
that the licence fee is commensurate with the
cost of rendering the service although exact
arithmetical equivalence is not expected.
However, this is not the only kind of fee
which can be charged. Licence fees can also
be regulatory when the activities for which a
licence is given require to be regulated or
controlled. The fee which is charged for
regulation for such activity would be validly
classifiable as a fee and not a tax although
no service is rendered. An element of quid
pro quo for the levy of such fees is not
required although such fees cannot be
excessive.”

163. The Uttar Pradesh Transit of Timber and other

Forest Produce Rules, 1978, itself came for consideration

before this Court in State of U.P. vs. Sitapur Packing

Wood Suppliers, 2002 (4) SCC 566. The High Court had held

the Rules to be constitutionally valid but levy of

transit fee was invalidated. In absence of quid pro quo,

the High Court did not strike down the Rules and observe

that it is open to the State Government to levy transit

fee by rendering service as quid pro quo. Rules 3 and 5

of 1978 Rules as well as provisions of Section 41 of

Forest Act, 1927 were considered by this Court. This 136

Court relying on the judgments of this Court in State of

Tripura v. Sudhir Ranjan Nath, Corpn. of Calcutta v.

Liberty Cinema and Secunderabad Hyderabad Hotel Owners’

Assn. v. Hyderabad Municipal Corpn. held transit fee

under Rule 5 as clearly regulatory and it was held that

it was not necessary for the State to establish quid pro

quo. Following was held in paragraphs 8,9 and 10:

“8. The distinction between tax and fee is
well settled and need not be restated
herein. It is clear from the afore­noticed
provisions of the Act and the Rules that the
transitory fee is regulatory in nature. The
question of quid pro quo is necessary when a
fee is compensatory. It is well established
that for every fee quid pro quo is not
necessary. The transit fee being regulatory,
it is not necessary to establish the factum
of rendering of service. Thus, there is no
question of a levy of transit fee being
invalidated on the ground that quid pro quo
has not been established.

9. In State of Tripura v. Sudhir Ranjan
Nath almost similar question came up for
consideration in relation to the State of
Tripura. It was held that Sections 41 and 76
of the Act vest total control over the
forest produce in the State Government and
empower it to regulate the transit of all
timber or other forest produce for which
purpose the State Government is also
empowered to make the Rules. The decision of
the High Court invalidating the levy of
application fee in the said case on the 137

ground that the State had not established
that the services were rendered in lieu of
the said fee, was reversed by this Court
holding that the fee was regulatory and not
compensatory. Reference may be made to the
decision in the case of Corpn. of Calcutta
v. Liberty Cinema wherein it was held that
the expression licence fee does not
necessarily mean a fee in lieu of services
and in case of regulatory fee no quid pro
quo need be established. Following Liberty
Cinema case2 similar views have been
expressed in Secunderabad Hyderabad Hotel
Owners’ Assn. v. Hyderabad Municipal Corpn.
and P. Kannadasan v. State of T.N.

10. The transit fee under Rule 5 is
clearly regulatory and, thus, it was not
necessary for the State to establish quid
pro quo. The High Court was in error in
holding that transit fee is invalid in
absence of quid pro quo. As a consequence
the penalty would also be valid. The penalty
was held to be invalid by the High Court in
view of its conclusion about the invalidity
of the transit fee. The penalty, however,
cannot be beyond what is permissible in the
Act. That aspect, however, is not under
challenge in these appeals as the State
Government after the impugned judgment of
the High Court realizing its mistake amended
the Rule so as to bring the provision of
penalty in accord with the provisions of the
Act.”

.

164. In view of the foregoing discussion, it is now well

settled that transit fee charged under 1978 Rules is

regulatory fee in character and further the State is not 138

to prove quid pro quo for levy of transit fee. After

having noticed the nature and character of the transit

fee as envisaged in 1978 Rules, we now proceed to notice

various provisions of 1978 Rules as well as Fourth and

Fifth Amendment Rules.

165. Section 41 of the Forest Act, 1927 empowered the

State to make Rules to regulate transit of forest

produce. The State of Uttar Pradesh by Uttar Pradesh Act

23 of 1965 with effect from 23.11.1965 after sub­section

(2) of Section 41 inserted sub­sections (2A) and (2B).

Sub­section (2A) is as follows:

“(2A) The State Government may by
notification in the Gazette delegate, either
unconditionally or subject to such
conditions as may be specified in the
notification, to any Forest­officer, not
below the rank of Conservator, the power to
prescribe fees under clause (c) of
sub­section (2).”

166. The State of U.P. in exercise of power under

Section 41 framed Rules, namely, the Uttar Pradesh

Transit of Timber and other Forest Produce Rules, 1978.

Rule 3 provided for regulation of transit of

forest­produce by means of passes which is to the 139

following effect:

“3. Regulation of transit of forest produce
by means of passes. ­ No forest produce
shall be moved into, or from, or within, the
State of Uttar Pradesh except as hereinafter
provided, without a transit pass in the form
in Schedule A to these Rules, from an
officer of the Forest Department or a person
duly authorised by or under these Rules to
issue such pass or otherwise than in
accordance with the conditions of such pass
or by any route or to any destination other
than the route or destination specified in
such pass :

Provided that no transit pass hall be
required for the removal­

(iii) of any forest produce which is
being removed for bona
fide consumption by any person
in exercise of a privilege
granted in this behalf by the
‘State Government’ or of a
right recognised under this
Act, within the limits of a
village in which it is
produced;

(iv) of forest produce by
contractor’s agency from the
forests managed by the Forest
Department, in which case the
movement shall be regulated by
the relevant conditions of sale
and terms of the corresponding
agreement deed executed by the
buyer;

(v) of such forest produce as may 140

be exempted by the State
Government from the operation
of these rules by notification
in the official Gazette.”

167. Rule 5 prescribes for fees payable for different

classes of passes. Rule 5(as originally framed) is as

below:

“5. Fees payable for different classes of
passes. ­ At the Check Chowki or depot
established under Rule 15 and specified
under proviso (ii) to clause (b) of sub­rule
(1) of Rule 4, the forest produce alongwith
the two copies of the pass (duplicate and
triplicate) shall be produced for
examination under sub­rule (4) of Rule 6 and
for payment of transit fee on the forest
produce calculated at the following rates;
corresponding receipt shall be granted in
the form given in Schedule ‘C’­

(i)per lorry load of .Rs.

timber or other 5.00 per
forest produce tonne of
capacity

(ii)per cart load of .Rs. 2.50
timber or other
forest produce

(iii)per camel load .Rs. 1.25
of timber or other
forest produce

(iv)per pony load of .Re. 0.50 141

timber or other
forest produce

(v)per head load of .Re. 0.25
timber or other
forest produce

Note. ­ In respect of resin and

resin products, the provisions of
the Uttar Pradesh Resin and Other
Forest Produce (Regulation of
Trade) Act, 1976 and the rules
framed thereunder, shall apply.”

168. By the Uttar Pradesh Transit of Timber and other

Forest Produce (Third Amendment) Rules, 2004 fee

prescribed in Rule 5 was increased, for example per lorry

load of timber or other forest produce in place of Rs.5/­

per tonne of capacity is shown fee of Rs.38/­ per tonne

of capacity. Now, comes to Fourth Amendment Rules, 2010

dated 20.10.2010, the fee which was Rs.38/­ for per tonne

per lorry load of timber or other forest produce was

increased as Rs.200/­ per cubic meter of capacity other

than of Khair, Sal and Sagaun (Teak), Shisham, Sandal

Wood and Red Sanders. Then comes to Fifth Amendment

Rules,2011 dated 04.06.2011. Rule 5 was amended where the

basis of levy of fee was changed into advalorem at the 142

rate of 5% or minimum Rs.2,000/­ for per lorry load of

timber or other than of Khair, Sal and Sagaun (Teak),

Shisham, Sandal Wood and Red Sanders. Relevant extract of

Rule 5 as amended by Fifth Amendment is as follows:

(i)(a) per lorry Rs.200.00 per (i)(a) per Advalorem at the
load of timber cubic Meter lorry load or rate of 5% or
other than of of capacity timber of minimum
Khair, Sal and Khair, Sal and Rs.2000/­
Sagaun (Teak) Sagaun (Teak)
Shisham, Sandal Shisham,Sandal
Wood and Red Wood and Red
Sanders Sanders
(b)per lorry load Rs.75.00 per (b) per lorry Advalorem at the
of timber other cubic Meter load of timber rate of 5% or
than of Khair, Sal of capacity other than of minimum Rs.750.
and Sagaun (Teak), Khair, Sal and
Shisham, Sandal Sagaun (Teak),
Wood and Red Shisham,Sandal
Sanders or other Wood and Red
forest produce Sanders or
other forest
produce except
as mentioned
in (i)c)
(c)per lorry Advalorem at the
load of other rate of 15% of
forest produce minimum Rs.400/­
coming from
mines, e.g.,
coal, lime,
stone, sand,
Bajari, and
other 143

“14…Thus, two elements are essential in
order that a payment may be regarded as a
fee. In the first place, it must be levied
in consideration of certain services which
the individuals accept either willingly or
unwillingly and in the second place, the
amount collected must be earmarked to meet
the expenses of rendering these services and
must not go to the general revenue of the
state to be spent for general public 148

purposes.”

176. Another case which needs to be noted is Sreenivasa

General Traders and Others vs. State of Andhra Pradesh

and Others, (1983) 4 SCC 353. In this case, the Court

after referring to earlier judgments of this Court laid

down the following in para 31:

“31.The traditional view that there must be
actual quid pro quo for a fee has
undergone a sea change in the subsequent
decisions. The distinction between a tax and
a fee lies primarily in the fact that a tax
is levied as part of a common burden, while
a fee is for payment of a specific
benefit or privilege although the special
advantage is secondary to the primary motive
of regulation in public interest. If the
element of revenue for general purpose
of the State predominates, the levy
becomes a tax. In regard to fees there
is, and must always be, correlation
between the fee collected and the service
intended to be rendered. In determining
whether a levy is a fee, the true test must
be whether its primary and essential
purpose is to render specific services to a
specified area or class; it may be of on
consequence that the State may ultimately
and indirectly be benefited by it. The
power of any legislature to levy a fee is
conditioned by the fact that it must be
“by and large” a quid pro quo for the
services rendered. However, correlationship
between the levy and the services rendered
(sic or) expected is one of general 149

character and not of mathematical
exactitude. All that is necessary is that
there should be a “reasonable relationship”
between the levy of the fee, and the
service rendered…”

177. In Delhi Race Club Limited vs. Union of India and

Others, (2012) 8 SCC 680, following was laid down in para

39 and 43:

“39. Dealing with such regulatory fees, this
Court in Vam Organic Chemicals Ltd. Anr.
Vs. State of U.P. observed that in case of a
regulatory fee, like the licence fee, no
quid pro quo is necessary, but such fee
should not be excessive…”

“43…Hence, in our opinion, the licence fee
imposed in the present case is a regulatory
fee and need not necessarily entail
rendition of specific services in return but
at the same time should not be excessive. In
any case, the appellant has not challenged
the amount of the levy as unreasonable and
expropriatory or excessive…”

mills and veneer/plywood are thus
regulatory in nature and the same has
been enhanced with a view to balance
and meet the enhanced expenditure being
incurred on enforcement/regulation of
the Forest Department..”

182. From the above it is clear that the submission of

learned counsel for writ petitioners is correct that the

expenditure which is claimed by the State as noticed in

paragraph 85 of the impugned judgment of the High Court 154

is the expenditure not confined to regulation of transit

but other expenditures of the forest department as well.

Thus, the correlation sought to be established by the

State on account of transit fee raised and those

expenditures as claimed is unfounded and has rightly not

been accepted by the High Court.

183. The High Court after considering the stand of the

State has held the following in paragraphs 141 and 142:

“141....The increase of the transit fees by
the 4th Amendment on cubic feet basis and
thereafter by impugned 5th Amendment on ad
valorem basis on movement of forest produce
on the ground that the value of the forest
produce has increased, has made it
unconstitutional on both the counts namely
that the cost of forest produce has no
co­relation with the objects sought to be
achieved by regulation of transit, and
secondly the State has not justified the
increase on any empirical data based on
scientific evaluation of the cost of
regulation. The fee has thus changed its
character from regulatory fee, and in the
absence of any defence on quid pro quo, to a
compensatory tax, which has the effect of
augmenting the revenue of the State.

142. In our opinion, considering the
arguments raised and the material placed
before us, even if the Rules of 1978 are
valid, the notifications dated 13.12.2010,
dated 4th June, 2011 under challenge,
increasing the transit fees firstly on cubic 155

feet basis and thereafter item wise on ad
valorem basis linked to the price by making
distinction between the forest produce, and
the minor minerals, which are also forest
produce, and without providing justification
for such increase, converted the regulatory
fees into compensatory tax. The State has
completely failed to justify, such arbitrary
increase, both on the principle of
reasonableness and in public interest.”

184. The aforesaid figures, as noticed in paragraph 85,

were expressly considered by the High Court in para 181

of the judgment where following observation has been

made:

“181....The collections in 2010­11, before
the 4th and 5th Amendments to the Rules of
1978 was 11288. 2 lacs, whereas the
expenditure of the establishment and other
administrative expenses on the enforcement
for the entire year 2010­11 on the
collection of transit fees by the department
was 32205.16 lacs. It is likely to 128
increase, as admitted by only 10­20% every
year. The revenue to be generated by the
transit fee, would thus be at least 10 times
more than the cost in collection of fees. By
any conservative estimate the increase of
fees on ad valorem basis, would be far above
the entire expenses born by the department
for enforcement on collection of the fees,
and thus the large amount of the collection
of transit fees will go into the coffers of
the State to raise its revenues. Even if
entire collections are spent on maintenance
of staff, vehicles, fuel and other 156

administrative expenses of forest
department, it looses its character as
regulatory fees, to regulate transit of
forest produce, with no benefit or service
directly or indirectly to facilitate the
trade or transit of forest produce. There is
no averment, nor it is argued by learned
Counsel appearing for the State that any
facility or services are to be provided or
are contemplated for the trade.”

185. The High Court thus held, after considering the

material brought by the State for increase transit fee,

that increase in transit fee was excessive and the

character of the fee has changed from simple regulatory

fee to a fee which is for raising revenue.

186. The High Court in para 181 has returned the finding

that “The revenue to be generated by the transit fee,

would thus be at least 10 times more than the cost in

collection of fees.”

187. A three­judges Bench in Calcutta Municipal Corpn.

And others vs. Shrey Mercantile (P) Ltd. and others, 2005

(4) SCC 245 had considered provisions of Calcutta

Municipal Corporation (Taxation) Regulations, 1989

whether levy was made on advalorem basis. The Court

examined the issue as to whether such levy is a “fee” or 157

a “tax”. The Court held the levy in the nature of tax and

also held it arbitrary and discriminatory, violative of

Article 14. The following was held in paragraph 16 by the

High Court:

“16.Therefore, the main difference between
“a fee” and “a tax” is on account of the
source of power. Although “police power” is
not mentioned in the Constitution, we may
rely upon it as a concept to bring out the
difference between “a fee” and “a tax”. The
power to tax must be distinguished from an
exercise of the police power. The “police
power” is different from the “taxing power”
in its essential principles. The power to
regulate, control and prohibit with the main
object of giving some special benefit to a
specific class or group of persons is in the
exercise of police power and the charge
levied on that class to defray the costs of
providing benefit to such a class is “a
fee”. Therefore, in the aforestated judgment
in Kesoram case1 it has been held that where
regulation is the primary purpose, its power
is referable to the “police power”. If the
primary purpose in imposing the charge is to
regulate, the charge is not a tax even if it
produces revenue for the Government. But
where the Government intends to raise
revenue as the primary object, the
imposition is a tax. In the case of
Synthetics Chemicals Ltd. v. State of
U.P.3 it has been held that regulation is a
necessary concomitant of the police power of
the State and that though the doctrine of
police power is an American doctrine, the
power to regulate is a part of the sovereign 158

power of the State, exercisable by the
competent legislature. However, as held in
Kesoram case1 in the garb of regulation, any
fee or levy which has no connection with the
cost or expense of administering the
regulation cannot be imposed and only such
levy can be justified which can be treated
as a part of regulatory measure. To that
extent, the State’s power to regulate as an
expression of the sovereign power has its
limitations. It is not plenary as in the
case of the power of taxation.”

188. The Court further held that since the Regulation

provides for imposition of fee on advalorem basis which

is a circumstance to show that the impugned levy is in

the nature of tax and not in the nature of a fee. In

paragraph 18 following was stated;

"18..Further, under the Regulations, the
Corporation while prescribing fees has
levied fees on ad valorem basis which is one
more cirumstance to show that the impugned
levy is in the nature of tax and not in the
nature of a fee. Further, the qunatum of
levy indicates that it is a tax and not a
fee. The analysis of the various provisions
of the Act and the impugned Regulations
shows that the impugned levy is in exercise
of power of taxation under the said Act to
augment the revenues primarily and not as a
part of regulatory measure.”

189. Shri Ravindra Srivastava, learned senior counsel, 159

appearing for the State has submitted that no exception

can be taken to the adoption of advalorem basis for

imposition of transit fee by means of Fifth Amendment

Rules. He submits that when a State is competent to levy

fee, what shall be the yardstick of such levy depends on

facts of each case and the State can find its own basis

for determining the extent of fee. He has relied on

three­Judges Bench judgment in P.M. Ashwathanarayana

Sefty and others vs. State of Karnataka and others, 1989

Supp.(1) SCC 696. He submits that this Court in the above

case was considering the levy of Court fee under

Karnataka Court Fee Valuation Act, 1958. The Court fee

was leviable on advalorem basis and the Court proceeded

to examine the issue as to whether Court fee can be

levied on advalorem basis. This Court in the above case

has also held that a fee may shed its complexion as a fee

and assume that of a tax. In paragraph 40 of the judgment

following was held:

“40. A fee which at the inception is
supportable as one might shed its complexion
as a fee and assume that of a tax by reason
of the accumulation of surpluses or the
happening of events which tend to affect and 160

unsettle the requisite degree of
correlation.”

190. The Court also addressed the issue as to whether

advalorem principle which is appropriate to taxation

would be inapplicable in the context of an impost which

is meant as a contribution towards the of costs of

service. The Court held that in view of the inherent

complexity of these fiscal adjustments, courts give a

larger discretion to the legislature in the matter of its

preferences of economic and social policies. The Court

further held that the question of the measure of tax or a

fee should be advalorem or ad quantum is again a matter

of fiscal policy. The Court ultimately held that although

advalorem principle which may not be an ideal basis for

distribution of a fee but no unconstitutionality or

infirmity can be incurred. However, the Court has held

that 'fee' meant to defray expenses of services cannot be

applied towards objects of general public utility. In

paragraph 96 following is stated:

“96. The power to raise funds through the
fiscal tool of a fee is not to be confused
with a compulsion so to do. While “fee” 161

meant to defray expenses of services cannot
be applied towards objects of general public
utility as part of general revenues, the
converse is not valid. General public
revenues can, with justification, be
utilised to meet, wholly or in substantial
part, the expenses on the administration of
civil justice. Many States including
Karnataka and Rajasthan had, earlier,
statutory upper limits fixed for the court
fee. But later legislation has sought to do
away with the prescription of an upper
limit. The insistence on raising court fees
at high rates recalls of what Adam
Smith­“Wealth of Nations” said:

“There is no art which one
government sooner learns of another
than that of drawing money from the
pockets of the people.””

191. In the aforesaid case, the Court, however, had

struck down Entry 20 in Schedule I of the Bombay Act

where advalorem Court fee was imposed without the benefit

of upper limit of Rs.15,000/­ which was prescribed in

respect of other suits and proceedings. The Court held

the aforesaid imposition as arbitrary and upheld the

judgment striking down the above provision. Paragraph 90

to 93 of the judgment are relevant and are extracted

below:

“90. In the appeal of the State of 162

Maharashtra arising out of the Bombay Court
Fees Act, 1959, the High Court has struck
down the impugned provisions on the ground
that the levy of court fee on proceedings
for grant of probate and letters of
administration ad valorem without the upper
limit prescribed for all other litigants—the
court fee in the present case amounts to Rs
6,14,814 —is discriminatory. The High Court
has also held that, there is no intelligible
or rational differentia between the two
classes of litigation and that having regard
to the fact that what is recovered is a fee,
the purported classification has no rational
nexus to the object. The argument was
noticed by the learned Single Judge thus:

Petitioners next contend that the impugned
clause discriminates as between different
types of suitors and that there is no
justification for this discrimination.
Plaintiffs who go to civil courts claiming
decrees are not required to pay court fees
in excess of Rs 15,000. This is irrespective
of the amounts claimed over and above Rs 15
lakhs. As against this, persons claiming
probates have no such relief in the form of
an upper limit to fee payable.

91. This contention was accepted by the
learned Single Judge who has upheld the
appeal. Indeed, where a proceeding for grant
of probate and letters of administration
becomes a contentious matter, it is
registered as a suit and proceeded with
accordingly. If in respect of all other
suits of whatever nature and complexity an
upper limit of Rs 15,000 on the court fee is
fixed, there is no logical justification for
singling out this proceeding for an ad 163

valorem impost without the benefit of some
upper limit prescribed by the same statute
respecting all other litigants. Neither
before the High Court — nor before us here —
was the impost sought to be supported or
justified as something other than a mere
fee, levy of which is otherwise within the
State’s power or as separate “fee” from
another distinct source. It is purported to
be collected and sought to be justified only
as court fee and nothing else.

92. The discrimination brought about by
the statute, in our opinion, fails to pass
the constitutional muster as rightly pointed
out by the High Court. The High Court, in
our opinion rightly, held:

“There is no answer to this contention,
except that the legislature has not
thought it fit to grant relief to the
seekers of probates, whereas plaintiffs
in civil suits were thought deserving of
such an upper limit. The discrimination
is a piece of class legislation
prohibited by the guarantee of equal
protection of laws embodied in Article 14
of the Constitution. On this ground also
item 10 cannot be sustained.”

93. We approve this reasoning of the High
Court and the decision of the High Court is
sustained on this ground alone. In view of
this any other ground urged against the
constitutionality of the levy is unnecessary
to be examined.”

192. The Court thus struck down a provision of the Court

fee where there was no maximum cap on advalorem basis. 164

There was no maximum cap in the Fifth Amendment Rules

although minimum fee was prescribed. Even in some of the

cases of fee advalorem principle may be applied but we

are of the considered opinion that in case of transit fee

where the object and purpose is regulation of transit of

forest produce adoption of advalorem principle for levy

of transit fee was not appropriate and such levy changed

the character of fee into a tax which has rightly been so

held by the High Court. We are, thus, of the view that

the High Court has given cogent and valid reason for

striking down the Fourth and Fifth Amendment Rules which

decision was rendered by the High Court after elaborate

and proper consideration of material brought before the

Court after analysing the purpose and object of the

imposition of transit fee. We, thus, affirm the judgment

of the High Court striking down Fourth and Fifth

Amendment Rules.

Transfer Petitions

193. This Court wide its order dated 19.11.2012 had

already directed the transfer petitions to be heard along

with SLP(C)NO.11367 of 2007. The Transfer Petitions, 165

thus, deserve to be decided in terms of the Civil Appeal

arising out of SLP(C)No.11367 of 2007.

Contempt Petitions

194. The seven Contempt Petitions have been filed in

which notices have not yet been issued. All the Civil

Appeals being decided by this order, the contempt

petitions deserve to be dismissed.

XVIII. Interim orders passed against the judgment of
the Allahabad High Court

295. In this batch of appeals in some appeals interim

order were passed. In some of the appeals, no interim

order was passed. This Court noticing the divergent

orders passed in the batch of appeals, passed a detailed

interim order on 29.10.2013 which was to the following

effect:

“1) The State shall be free to recover transit fee
for forest produce removed from within the State
of U.P. at the rate stipulated in the 3rd
amendment to the Rules mentioned in the earlier
part of this order.

2) Any such recovery shall remain subject to the
ultimate outcome of present petitions pending in
this Court.

3) In the event of writ petitioners/private 166

parties succeeding in their cases, the amount
deposited/recovered from them shall be refunded to
them with interest at the rate of 9% p.a. from the
date the deposit was made till actual refund.

4) The State shall maintain accurate amount of
recovery made and the nature and the
quantum/quantity of the produce removed by the
private parties concerned.

5) Even in the 2nd batch of cases arising out of
Writ Petition No. 975 of 2004 whereby the High
Court has struck down the 4th and 5th amendment to
the Rules, the State shall be free to make
recoveries in terms of the 3rd amendment in regard
to the forest produce removed from within the
State of U.P. The operation of the orders passed
by the High Court shall to that extent remain
stayed.

6) This modification shall not apply to exempted
goods or industrial by products like Klinker and
fly ash.”

196. By a subsequent order dated 26.04.2016, this Court

further modified the interim order dated 29.10.2013. The

order dated 29.10.2013 was modified on 26.04.2016 to the

following effect:

“(1) Insofar as forest produce as defined in
sub­clause(a) of Clause(4) of Section 2 is
concerned, the State shall be free to recover
transit fee within the State of U.P. at the
rate stipulated in the fifth amendment to Rule
5 as aforesaid;

(2) Insofar as forest produce originating from 167

State of U.P. and covered by sub­clause (b) of
Clause (4) of Section 3 is concerned, the
State shall be free recover transit fee at the
rate stipulated in the fifth amendment to the
aforesaid Rule 5.

(3) Insofar as forest produce covered under
sub­clause(b) of Clause(4) of Section 2, which
does not originate from State of U.P. but is
merely passing through the State, the State
shall be free to recover transit fee in
respect of such forest produce at the rate
stipulated in the fourth amendment to
aforesaid Rule 5.

(4) Any such recovery shall remain subject to
the ultimate outcome of present petitions
pending in this Court.

(5) In the event of writ petitioners/private
parties succeeding in their cases, the amount
deposited/recovered 27 from them shall be
refunded to them with interest @ 9% per annum
from the date of deposit till actual refund.

(6) The State shall maintain accurate amount
of recovery made and the nature/quantity of
the produce removed by the private party is
concerned.

(7) These modified directions shall come into
effect on and from 1 st May 2016. (8) This
modification shall not apply to exempted goods
or industrial by­products like Klinker fly
ash.”

197. This Court directed that State shall be free to

recover transit fee within the State of U.P. at the rate 168

stipulated in the Fifth Amendment to Rule 5.

198. The Court also held that such recovery shall remain

subject to the ultimate outcome of present cases pending

in this Court. With further condition that in the event

of writ petitioners/private parties succeeding in their,

the amount deposited/recovered from them be refunded with

interest @9%.

199. We having upheld the judgment of the High Court

dated 11.11.2011 striking down Fourth and Fifth Amendment

Rules further steps needs to be taken as per interim

direction dated 26.04.2016 which came into the effect

from 01.05.2016. It is made clear that in so far as prior

to 01.05.2016 recovery was permitted as per Third

Amendment Rules which has been upheld, there is no

question of considering any claim of refund of any

transit fee prior to 01.05.2016. The transit fee is an

indirect tax and the State is entitled to consider the

claim of refund provided the Entry Tax has not passed on

to the consumer which may result into unjust enrichment.

Thus we permit the State to consider any claim of refund 169

of transit fee on the condition that State shall permit

refund only after being satisfied that there is no

passing of the transit fee to the ultimate consumer and

refund may not result in unjust enrichment.

XIX. CIVIL APPEALS OF STATE OF M.P. FILED AGAINST
THE JUDGMENT DATED 14.05.2007

200. The Writ Petitions were filed by the respondents

to the Civil Appeals in the High Court of Madhya Pradesh

praying for quashing the Notification dated 28.05.2001

issued by the State of Madhya Pradesh fixing the amount

of Transit Fee for issuance of Transit Pass in exercise

of power under Rule 5 of the M.P. Transit (Forest

Produce) Rules, 2000 (hereinafter referred to as 'Rules,

2000'). Writ Petitioners have also prayed for declaring

Section 2 (4)(b)(iv) and Section 41 of Indian Forest

Act, 1927(hereinafter referred to as 'Act, 1927') as

unconstitutional and ultra vires to the extent they

relate to minerals. Rule 5 of Rules, 2000 as well as

Notification dated 28.05.2001 was also sought to be 170

declared as ultra vires to the powers of the State

Government under Act, 1927. In the Writ Petition the

writ petitioners raised the following contentions:

201. The Regulatory Fee with regard to transit fee on

minerals is totally illegal and without jurisdiction in

as much as the field is covered by the MMDR Act 1957.

Regulatory Fee imposed by the State of Madhya Pradesh is

a direct encroachment on the regulatory measures which

are covered within the Act, 1957. Mineral Concession

Rules, 1960(hereinafter referred to as 'Rules, 1960')

read with Mineral Transit Pass Regulations,

1996(hereinafter referred to as 'Regulations, 1996'),

which specifically provides for issue of transit pass

and charging of fee covers the field and State

Government cannot frame any rule of the present nature

effecting the transportation of mineral. Rule 5 of

Rules, 2000 as well as Notification dated 28.05.2001 are

contrary to Section 41 of Act, 1927. The Act, 1927 being

a pre­constitutional statute enacted by the dominion

legislature and Act, 1957 being a parliamentary

enactment will have overriding effect over the 171

provisions of the earlier statute. The State Government

has put the fee on Transit Pass qua tonnage which makes

it colourable piece of exercise of power.

202. The State contested the Writ Petition by filing

counter­affidavit and contended that the Act, 1927 has

been designed to protect and increase the forest wealth

and Notification dated 28.05.2001 has been issued in

exercise of power under Rule 5 of Rules, 2000, which

were framed under Section 41 of the Act, 1927. The

Regulatory Fee is not charged on extraction of mineral

and there is no encroachment on the provisions of Act,

1957. The Regulatory Fee is charged only on the

transportation of minerals. The method chosen by State

Government to levy the fee on the basis of quantity of

minerals would not change the nature and character of

the levy. The power of regulation and control under Act,

1957 is totally different from the imposition of

Regulatory Fee on Forest Produce by the State.

203. The Division Bench of the High Court by its

judgment dated 14.05.2007, although repelled the several

arguments of petitioner which we shall shortly notice 172

hereinafter but declared the Notification dated

28.05.2001 as beyond the scope of Section 41 of Act,

1927.

204. Learned senior counsel in support of the

appellants contends that the Act, 1927, the Transit

Rules, 2000, and Act, 1957 operate in different fields

and spheres and the mere incidental trenching or

overlapping of the provisions of the State enactment

will not render the State enactment unconstitutional.

The view of the High Court that Notification dated

28.05.2001 is invalid and beyond the scope of Section 41

of Act, 1927 is erroneous. The Transit Pass is computed

on the basis of weight/volume of the Forest Produce so

as to maintain the consistency and transparency in

computation of transit fees. The computation or measure

of levy will never change the nature of the levy which

in the present case is regulatory in nature.

205. The High Court having held that the rules framed

by the State under Section 41 of the Act, 1927 operates

in different fields and spheres from the MMDR Act, 1957

and the State government has the legislative competence 173

to frame the rules, holding that the computation of fee

on the basis of weight/volume of the Forest Produce is

illegal, cannot he sustained. He further contended that

the High Court has issued direction for refund of the

fees collected by the State in pursuance of the

Notification dated 28.05.2001 and it is submitted that

the direction of the High Court to refund the fees is

contrary to the law settled by this Court that in

indirect taxes the burden is already transferred to the

consumers and therefore, direction to refund the tax so

collected, the burden of which has already been

transferred, will lead to unjust enrichment of assessee.

206. Learned counsel appearing for the writ petitioner

have refuted the contention of the State and has

reiterated the submissions. Respondent­petitioners have

further raised the submissions, which were pressed

before the High Court. It is submitted that even though

the respondent­petitioners has not filed any Special

Leave Petition challenging the judgment of the High

Court dated 14.05.2009, they are entitled to urge the

grounds which were pressed before the High Court in 174

support of the Writ Petition.

207. It is submitted that petitioner does not mine coal

but buys it from Northern Coal Fields Ltd. or from other

coal fields. Petitioner also reimburses the royalty etc

on the coal purchased from different coal fields as per

the provisions of Act, 1957. The impugned demand is

illegal and without jurisdiction as the field is fully

occupied by rules made thereunder. The Transit Fee of

Rs. 7 per tonne fixed by Notification dated 28.05.2001

is Transit Fee on minerals which is illegal and without

jurisdiction.

208. We have considered the submissions raised by

learned counsel for the parties and perused the record.

Before we proceed to consider the submission, it is

necessary to notice the finding given by the Division

Bench of the High Court in the impugned judgment on

various contentions raised before it. The Division Bench

of the High Court considered the submission of learned

counsel for the writ petitioners that Act, 1957 occupies

the field and the State had no jurisdiction to frame any

rules regarding transit of minerals. After noticing the 175

various judgments of this Court, the Division Bench

concluded that two enactments i.e. Act, 1927 and Act,

1957 operate in different areas. The Division Bench

specifically rejected the argument of writ petitioners

that Section 2(4)(b)(iv) and Section 41 of the Act, 1927

be declared ultra vires. The Division Bench of the High

Court also noticed the judgment of this Court in Sudhir

Ranjan Nath (supra) and Sitapur Packing Wood Suppliers

(supra). In para 63 of the judgment following was held:

“63...We have referred to two judgments
of the Apex Court and we are of the
considered opinion on that both the
enactments operate in different areas. The
operational sphere being different we
conclude and hold that the submission that
Section 2 (4)(b)(iv) and Section 41 should
be declared ultra vires is sans substratum
and we repel the same.”

209. The Division Bench of the High Court further

rejected the submission of the writ petitioners

impugning the Rule 5 of Rules, 2000 framed under Section

41 of the Act, 1927. In para 71 72 following has been

held:

“71. On a perusal of the aforesaid form it
is perceptible that there is mention of
locality of storage, name and address of the 176

owner, description of produce and quantity,
name of place of transportation, route and
barrier at which forest produce would be
produced for check. On a perusal of the
aforesaid form it is manifest that it
pertains to forest produce at large. Fee can
be levied but the fee must have nexus with
the transit for checking in the context of
forest goods. Hence, we are not inclined to
accept the contention of the learned senior
counsel for the petitioners that framing of
the said rule under Section 41(2) is not
permissible.”

“72....At this juncture we may
repeat at the cost of repetition
that the purpose of Section 41 of
the 1927 Act, and the purpose of the
MMDR Act are quite different...”

210. The High Court thus has rejected the submission

of the writ petitioners, holding that both 1927 Act

and 1957 Act operate into different spheres. The High

Court further held that rule framed by the State under

Section 41 of the Act, 1927 i.e. Rule 5 of Rules, 2000

is valid. Various submissions of the writ petitioners

reiterated before us on the basis of Act, 1957 and

rules framed thereunder including Section 4(1A) and

Section 23C of Act, 1957 have already been considered

by us, while considering the submission raised with 177

regard to Civil Appeals arising from the judgment of

the Allahabad High Court. The above submission having

already noted and considered, it needs no repetition

here. Hence, submission raised by learned counsel for

the writ petitioners on the basis of Act, 1957 is thus

rejected.

211. Now, we come to the reason on the basis of which

Division Bench of the High Court has allowed the Writ

Petition by quashing the Notification dated

28.05.2001. The High Court held that the Notification

dated 28.05.2001 is contrary to the provisions of

Section 41 of the Act, 1927 and the notification

transgresses Rule 5 of Rules, 2000 because Rule 5

provides that State Government or an authorised

officer by it, from time to time, shall fix the rate

of the fee for issue of Transit Pass. The fee is to be

issued for issue of Transit Pass and Transit Pass by

no stretch of imagination can have any nexus with unit

of minerals. Thus in fact, it is a fee pertaining to

the minerals and not a fee issued on Transit Pass. In

para 74 of the judgment, following has been held by 178

the High Court:

“74...Hence, we have no doubt in holding
that the notification issued is contrary to
the provisions of Section 41 of the Forest
Act and in fact such issuance of
notification cannot be said to be in
consonance with the said provision. It
transgresses Rule 5 because Rule 5
stipulates that the State Government or an
officer authorised by it from time to time
shall fix the rate of fee for issue of
transit pass as per the provisions of Rule

4. Thus the fee is to be fixed for issue of
a transit pass and a transit pass by no
stretch of imagination can have any nexus
with the unit of minerals in fact if we
allow ourselves to say, it is said to be a
gymnastic in the rule making process to
impose a fee on the minerals in the guise of
collection of fee on transit pass. In fact
it is a fee pertaining to minerals and not a
fee on issue of transit pass. As we have
scanned the anatomy of the provisions of
both the enactments rules framed there under
and analysed the purport and import of the
notification, the true nature and character
of levy surface something different. The
exact nature of levy cannot be marginalised
by making a sweeping statement that is a
measure of levy and the unit of minerals has
been chosen as a rational basis as there is
transportation by rope ways by land and by
other means. The units chosen really tries
to enter into the arena of regulation and
control. It may innocuous look to be a
measure or standard of fee on transit but in
essentiality it is a trespass into the area
of regulation and control. As has been
stated earlier the 1957 Act is a regulatory
Act and meant for minerals and minerals area 179

development but such imposition of fee as we
are disposed to think on the basis of
foregoing analysis creates a dent and
concavity in the regulation and control.
That apart the standard or measurement does
not have any nexus with the essential
character of the levy. Therefore the
notification runs counter to the rule
because that was not the intendment of the
Rule and further that cannot be the
intendment of the language in which sections
41 and 76 of the 1927 Act have been couched.
Quite apart from the above, once we have
held that Section 41 of the 1927 Act and the
provisions of 1957 Act operate in different
spheres and judged by those parameters, the
notification has to be lanceted and
accordingly we so hold.”

(b) Division
2 Name and address of owner of forest produce-
3 Description of produce and quantity-

4 Property mark etc.-
5 Name of place to which the produce is to be
transported- 181

6 Route by which produce is to be transported-
7 Barrier at which forest produce will be produced
for check
8 Date of expiry of pass-

Note:­ Second foil will be similar to the Counterfoil.

Signature of checking officer

Signature of issuing officer

213. Column three provides for description of produce

and quantity.

Rule 5 of Rules, 2000 provides for as follows:

s“5. Rates of fee for issue of transit
pass:­The State Government or an officer
authorised by the State Government from time
to time, shall fix rates of fee for issue of
transit pass as per the provisions of Rule

4.”

214. The Rule provides for fixing of rates of fee for

issue of Transit Pass. The word 'rate' has been

defined in Advanced Law Lexicon by P. Ramanatha Aiyar,

in the following words:

“Rate means a rate, cess or assessment the
proceeds of which are applicable to public
local purposes and leviable on the basis of
a valuation of property, and includes any
sum which, although obtained in the first
instance by a precept, certificate or other
instrument requiring payment from some
authority or officer, is or can be
ultimately raised out of a rate.” 182

215. When the State is empowered to fix rates of fee,

it can very well fix the fee on the quantity of Forest

Produce. High Court having upheld both Section 41 of

the Act, 1927 as well as Rule 5 of Rules, 2000, we see

no reason as to how the notification issued under Rule

5 can be held to be beyond the powers of the State.

216. When the State is empowered to fix the rate of

fee, it has latitude under the statute to adopt a

basis, for fixation of rates of fee. It cannot be said

that under the statute fee can be charged only to meet

the expenses which are incurred for printing or

preparation of passes. The High Court has taken a

incorrect view of the matter while coming to the

conclusion that Notification dated 28.5.2001 is beyond

the power of the State under Rule 5 of Rules, 2000.

Rule 5 clearly empowers the State to fix the rate of

fee and the rate of fee can be fixed on the basis of

quantity/ volume of the Forest Produce. We thus are of

the view that the High Court committed error in

setting aside the Notification dated 28.05.2001. This 183

Court in State of U.P. Vs. Sitapur Packing Wood

Supplier (Supra) which judgment has already been

noticed by Division Bench of High Court has considered

the rules framed by State of U.P. under Section 41 of

1927 Act. Rule 5 of the U.P. Transit of Timber and

Other Forest Produce Rules, 1978, provided for payment

of transit fee on the forest produce calculated on the

rates as mentioned therein. High Court had upheld the

competence of the State in providing fee as set out in

Rule 5 which was noticed by this Court in paragraph 7

of the judgment, which is to the following effect:­

"7. Having found that the constitutional
competence in providing fee as set out in
Rule 5 is not lacking, the High Court
accepted the challenge to the validity of
levy on the ground that the fee is not
supported by the principle of quid pro quo.
It held that no service is provided in lieu
of the fee to any person much less to the
person from whom the transit fee is charged.
In the view of the High Court, reasonable
relationship between the levy of the fee and
the services rendered had not been
established.”

217. High Court although upheld the competence of the

State to provide fee but held that fee is not supported 184

by principles of quid pro quo. On that ground transit fee

was held to be invalid. The view of the High Court was

reversed and this Court held that charging of transit fee

was valid. Following was held in paragraph 10 and 11:­

"10. The transit fee under Rule 5 is clearly
regulatory and, thus, it was not necessary
for the State to establish quid pro quo. The
High Court was in error in holding the
transit fee is invalid in absence of quid
pro quo....

11. For the aforesaid reasons, we allow
these appeals and hold that the levy of the
transit fee is valid and the judgment of the
High Court is accordingly set aside. The
parties are, however, left to bear their own
costs.”

218. It is also relevant to note that although the High

Court in its judgment has held that both 1957 Act and

1927 Act operate in different fields. However, it had

also made observations that imposing fee by fixing

tonnage and cubic meter as unit had entered into

regulation and control, which is in the realm of the MMDR

Act. In paragraph 74, following has been observed:­

"74....Though a stance has been taken that it
is a regulatory fee and the State has to
undertake many works for routes and
environment and, therefore, it is to be
regarded as regulatory fee but as we 185

perceive, imposing fee by fixing tonnage and
cubic meters as unit, it enters into the
'regulation and control' which is in the
realm of the MMDR Act, for it has impact on
the mining activity and the primary purpose,
as is patent, is to regulate the mineral. It
is not for the purpose of regulating the
transit of minerals but to have a regulatory
measure of control of minerals. The
difference between issue of transit pass for
a fee has been galvanised into a fee on
mineral unit which has a controlling effect
on the development of minerals.”

Order in this appeal has been reserved on
03.08.2017. This appeal does not relate to entry tax
rather the leviability of Trade Tax under the U.P.
Trade Tax Act, 1948. This appeal is de­tagged to be
listed after two weeks.

SLP(C)Nos.13656 and 15721 of 2012

Order in these petitions has been reserved on
03.08.2017. These are de­tagged to be listed before a
Bench of which Hon'ble Mr. Justice Ashok Bhushan is not
a member.